Determinants of Consumers’ Willingness to Pay a Price Premium for Organic Food in Nepal

Abstract

Growing concerns over food safety, human health, and environmental sustainability have increased consumer interest in organic food. However, this concern has not fully translated into actual purchasing behavior. It is said that high price premiums have constrained the expansion of Nepal's organic food market. Amid this concern, this study examined the determinants of urban consumers’ willingness to pay (WTP) a price premium and the level of price premium for organic food in Bharatpur Metropolitan City of Chitwan District, Nepal. A convenience sampling technique was used to collect the primary data from 384 household food purchasers using a semi-structured questionnaire. A double hurdle model was used to analyze the two-stage nature of consumer decision-making, i.e., a binary probit model to estimate WTP for a price premium and a truncated regression model to estimate the price premium level conditional on WTP. The results revealed that 80.73% of respondents are willing to pay a premium for organic food, with the majority willing to pay 10–20%. Years of schooling (ME = 0.091, p<0.05), household income (ME = 2.757, p<0.01), access to market information (ME = 0.067, p<0.05), availability of organic food (ME = 0.211, p<0.05), presence of organic labels/tags (ME = 0.341, p<0.01), and favorable perceptions toward organic food (ME = 0.464, p<0.01) significantly influence consumers’ WTP a price premium. Conditional on willingness to pay, household income (β = 3.405, p<0.01), household size (β = −0.066, p<0.05), access to market information (β = 0.137, p<0.05), and consumer perceptions (β = 0.361, p<0.01) significantly affect the level of price premium. These findings recommend that strengthening market information systems, improving availability and accessibility of organic food, and establishing a credible certification and labeling system are necessary for a sustainable organic food market in Nepal.