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Analyses of Consumer Responsiveness to Changes in the Price of One Per Cent Fat-Milk in Selected Markets in Western Massachusetts

Department of Agricultural and Food Economics, University of Massachusetts, Amherst 01002
and Market Administrator's Office, New York-New Jersey Milk Marketing Area, New York City 10000

ABSTRACT

This pricing study involved fortified one per cent fat milk. The 26 week experiment, September 1, 1969 to February 28, 1970, was in four parts.

Part I. September 1 to September 13, 1969. Flavor evaluations were conducted in four stores of a regional chain. A questionnaire was asked of participants. Of the 705 respondents, 662 reacted favorably to the one per cent fat-milk. Consumers were not well informed about the composition of one per cent fat or of regular milk.

Part II. September 15 to November 8, 1969. Treatments (price differentials) of –8, –4, 0, and 4 cents below, equal to, and above the price of regular milk were as signed to the price of the one per cent half gallons, in the four stores, under controlled conditions of the Latin square. Treatments lasted two weeks. There were significant differences among treatments at the 10% level. A derived price elasticity of demand coefficient of –1.16 indicates that response to the selected price range for the one per cent fat-milk was relatively elastic.

Part III. November 10, 1969 to January 3, 1970. This was a control period to disassociate the bias in sales due to the intervening holidays. The price of the one per cent fat-milk was constant in the four test stores.

Part IV. January 5 to February 28, 1970. The same treatments and Latin square design were used as in Part I. There were no significant differences among treatments. The derived price elasticity coefficient of –.91 was attained.

The results, although not conclusive, seem to indicate, (when test periods were combined), a slightly elastic demand, –1.03, for one per cent milk at retail.