Explaining Demand for Organic Foods

Summary

We analyse the consumption of organic foods in Denmark in the late 1990s. The
aim of our study is to identify the influence of price premiums on buying propensity. The methodological approach is econometric estimation based on four-weekly observations of purchases of organic and conventional dairy products. We apply the AIDS demand system and estimate dynamic as well as static specifications, homothetic as well as nonhomothetic specifications, and furthermore specifications with and without trends. The preferred model is a homothetic, static model with a linear trend. The price elasticities estimated in our study are higher than those estimated in other studies on food demand.
In the end of the paper, we outline our current research on organic foods.