Asian Economic Journal - 2020 - Lee - Consumer

Asian Economic Journal 2020, Vol. 34 No.
1, 79–96 79
Consumers’ Valuation of Geographical

Indication-Labeled Food: The Case of Hom Mali
Rice in Bangkok*
Ji Yong Lee, Noppawong Pavasopon,

Orachos Napasintuwong and Rodolfo M. Nayga Jr
Received 3 December 2018; Accepted 18 January 2020
This study investigated consumers’ valuation of geographical indication (GI) and

protected geographical indication (PGI)-labeled rice in Bangkok using a non-
hypothetical experimental auction in a field setting. We also examined the effects
of sequentially providing information about geographical indications on product
valuation. The results suggest that consumers are willing to pay premiums for rice
with geographical certifications, with the highest premium for the rice with both
GI and PGI certifications. The provision of detailed information about the geo-
graphical indications further increases the premiums. However, consumers suffer a
welfare loss under the current high market prices for rice with geographical certi-
fications. A price reduction of approximately 10 percent would be needed to gain
consumer welfare from the introduction of GI and PGI certification.
Keywords: consumer valuation, geographical indication, protected geographical

indication, information effect, Jasmine rice, rice quality.
JEL classification codes: C93, D12, Q13.
doi: 10.1111/asej.12196
I. Introduction
The primary objectives of food labeling are to provide product information to
consumers and to help them make informed purchasing decisions that could
*Lee: Department of Agricultural and Resource Economics, Kangwon National University,

205 College of Agriculture and Life Sciences Building 3, Chuncheon-si, Gangwon-do 24341,
Republic of Korea. Pavasopon: Department of Agricultural and Resource Economics, Center for
Advanced Studies for Agriculture and Food, Kasetsart University Institute for Advanced Studies,
Kasetsart University, Bangkok 10900, Thailand. Napasintuwong (corresponding author): Department
of Agricultural and Resource Economics, Kasetsart University, Center for Advanced Studies for
Agriculture and Food, Kasetsart University Institute for Advanced Studies, Kasetsart University,
Bangkok 10900, Thailand. Email: orachos.n@ku.ac.th. Nayga, Jr: Department of Agricultural Eco-
nomics and Agribusiness, University of Arkansas, 217 Agriculture Building, University of Arkansas,
Fayetteville, AR 72701, USA. This work was partially supported by the Center for Advanced Studies
for Agriculture and Food, Institute for Advanced Studies, Kasetsart University Under the Higher
Education Research Promotion and National Research University Project of Thailand, Office of the
Higher Education Commission, Ministry of Education, Thailand.
© 2020 East Asian Economic Association and John Wiley & Sons Australia, Ltd
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ASIAN ECONOMIC JOURNAL 80
facilitate the resolution of market failure caused by asymmetric information

(Akerlof, 1970) regarding the supply of high-quality agricultural products. It
could also minimize consumers’ search costs by reducing the possibility of
choice confusion among many heterogeneous food products (Landes and
Posner, 1987). For producers, the provision of food labeling with quality infor-
mation differentiates their products from competing products and it could also
offer them an opportunity to obtain premium prices (Deselnicu et al., 2013).
Among the many food labels, one particular label that has recently received con-
siderable attention in consumer studies is the geographical indication (GI) label
(Loureiro and McCluskey, 2000; Bonnet and Simioni, 2001; Teuber, 2010;
Menapace et al., 2011; Aprile et al., 2012). The motivation of these studies
comes from the recognition that consumers care about social or ethical proper-
ties of food products, reflected by, for instance, the production region and pro-
duction methods (Briggeman and Lusk, 2010).
The interest in using geographical information in food product labeling have
significantly increased in Europe following the recognition of a distinct form of
intellectual property rights in the TRIPS agreement of the WTO in 1994
(Josling, 2006). Geographical indication labels (e.g. geographical indication
(GI) and protected geographical indication (PGI)) provide both the origin infor-
mation and the origin-associated quality of food products. The GI label repre-
sents an identification of food products with a particular geographic region and,
thus, provides the ability to trace those products to their regions. Moreover,
labels with geographical information were originally developed to promote the
recognition of unique and distinct-quality agricultural products and, thus, pro-
vide product quality information to consumers.
Several previous studies have shown that geographical information supplied
with food products can influence consumers’ food choices. Examples are stud-
ies about geographical information in products such as olive oil (Menapace
et al., 2011; Aprile et al., 2012), wine (Mtimet and Albisu, 2006; Teuber,
2011), cheese (Bonnet and Simioni, 2001), and meat (Loureiro and
McCluskey, 2000). A potential important reason for the geographical informa-
tion being provided with food is that that the geographical indication may
assure consumers of the high quality of food products. Several empirical stud-
ies have examined the effect of geographical information on consumer food
choices, but most of these studies have been conducted in developed countries.
There is scant information on the value of geographical information in food
products in developing countries. This is an important gap in the literature
because a geographical indication label could be adopted in developing coun-
tries to further improve the livelihood of farmers, given that it is a tool that can
be used to identify the exceptional quality of agricultural products, maintain
the sustainability of a defined indigenous production region, and support the
development of rural communities (Rangnekar, 2004; Jena and Grote, 2010).
The first contribution of this study is, thus, to consider the use of a geographi-
cal indication label for consumers in a developing country (i.e. Thailand). In
CONSUMERS’ VALUATION OF GEOGRAPHICAL INDICATION 81
addition, this study is among the first to examine a PGI label, protected by the
European GI system, in developing countries.
The product of interest in our study is ‘Khao Hom Mali Thung Kula Rong-
Hai’ or Hom Mali rice produced in Thung Kula Rong-Hai, an area located in
northeast Thailand. Hom Mali rice, commonly known as Jasmine rice, has been
recognized in the international market for its unique aromatic soft and sticky
quality favored by consumers from rice eating countries (Suwannaporn and
Linnemann, 2008a). Hom Mali rice specifically from Thung Kula Rong-Hai is
known by the locals for its more prominent aroma, given the aridity and salinity
conditions of the Thung Kula Rong-Hai region and the traditional knowledge of
the production process, including drying after harvest. Khao Hom Mali Thung
Kula Rong-Hai was registered for GI certification in Thailand in 2006 and for
PGI certification by the EU in 2013. Only products that meet the specifications
following the code of practice of Khao Hom Mali Thung Kula Rong-Hai prod-
ucts are able to use these certification labels. The availability of rice products
with these certification labels in the domestic market has been limited in retail
stores because only a few producers have been able to meet the specifications
and code of practice required by the GI and PGI protected geographical indica-
tion certification systems. For instance, as of January 2017, there are only
2 brands that have commercialized ‘Khao Hom Mali Thung Kula Rong-Hai’
with both Thai GI and EU PGI certifications in the domestic market, while
fewer than 10 brands have been commercialized with only the Thai GI certifica-
tion. Numerous brands, however, have been commercialized with only the name
‘Khao Hom Mali Thung Kula Rong-Hai’ in the local language without any geo-
graphical indication certification labels.
The market for GI/PGI-labeled rice products in Thailand is still relatively
small, likely due to the lack of knowledge about these GI certification labels
(i.e. Thai GI and EU PGI) and the current high market price of rice products
with these labels. Hence, to devise marketing strategies and policies that could
help increase the demand and expand the market for GI/PG-labeled rice prod-
ucts in Thailand, more information about what consumers are actually willing to
pay for these products is needed. Product information can affect consumer per-
ception and choice behavior (see Fox et al., 2002; Lusk et al., 2004; De Steur
et al., 2013). Given this finding, it will also be beneficial to be familiar with the
public’s preferences and valuation of GI and PGI-labeled rice with and without
additional information about geographical indication labeling because this will
help guide the industry and marketers in developing appropriate marketing and
pricing strategies and also assist policy-makers to make informed decisions on
how to effectively implement the geographical labeling system. Given the
importance of consumers’ recognition and valuation of geographical indication
labels, the objectives of this study are threefold: (i) to examine consumers’ valu-
ation of rice products with geographical indication labels compared with a con-
ventional rice product; (ii) to investigate the effects of additional information
about geographical indication labels on consumers’ valuation; and (iii) to
examine consumer welfare change after the introduction of the geographical

indication labels. No other study has examined this important issue in Thailand.
We used a non-hypothetical experimental auction (i.e. the Becker–DeGroot–
Marschak (BDM) mechanism (Becker et al., 1964)) to elicit consumers’ valua-
tion of the geographical indication labels. To examine the potential effects of
additional geographical certification information, we also tested sequentially
provided information about geographical indication labels (i.e. only labeling
information and detailed labeling information). We found that Thai consumers
have positive preference for both GI and PGI certification labels. Consumers
also increased their premium for the rice products with GI and PGI certifications
when they were provided detailed information about the certification labels. Our
results have implications for the design of marketing strategies for rice products
with geographical indications. Given consumers’ positive preference for both
geographical indications, there is potential to expand the market for both GI and
PGI-labeled rice products. Because providing individuals with detailed informa-
tion on the certification labels can have substantial effects on their valuation of
rice with GI and PGI certifications, entities should make information on GI and
PGI certifications more widely available and easily accessible to consumers.
II. Khao Hom Mali Thung Kula Rong-Hai

Hom Mali rice from Thailand is perceived as a high quality aromatic rice that
commands a substantially higher price in the world market. The price of Thai
Hom Mali rice is typically more than double the price of normal white rice. For
example, on 5 September 2018, the F.O.B. price of Thai Hom Mali rice was US
$1199/ton, while the price of 100 percent grade B white rice was US$425/ton
(Thai Rice Exporters Association, 2018). In the past several decades, Thailand
has been the primary origin of aromatic soft and sticky rice in the international
market. As Hom Mali rice has played an important role in building a strong repu-
tation for Thailand as a country of origin for high quality long grain rice, several
countries have developed Jasmine-like rice products to compete with Thailand’s
Hom Mali rice in the international market. Thailand’s Hom Mali rice standard is
granted to only two varieties, KDML105 and RD15, implying that the quality of
Hom Mali rice from Thailand is constrained to specific varieties. Furthermore,
since 2005, the Ministry of Foreign Trade has used a certification mark of ‘Thai
Hom Mali Rice’, similar to a trademark, to eliminate asymmetric information
regarding country of origin between international consumers and exporters.
Nevertheless, Vietnam and Cambodia started to export their aromatic rice
varieties in 2007 and 2012, respectively (Trang and Napasintuwong, 2016). Due
to price competitiveness, Vietnam has reaped most of the market share of aro-
matic rice in China, while Cambodia has penetrated into the EU market as a
result of a Generalized System of Preferences tariff exemption. Another possible
important reason for the relative success of Vietnam’s and Cambodia’s aromatic
rice is that international consumers still do not recognize that the certification
mark of Hom Mali rice originates from Thailand.
Under TRIPS agreement, GI is defined as ‘indications which identify a good
as originating in the territory of a member, or a region or locality in that terri-
tory, where a given quality, reputation or other characteristics of the good is
essentially attributable to its geographical origin’ (Article 22(1)), indicating that
‘there will be no obligation under this agreement to protect GIs which are not or
cease to be protected in their country of origin’ (Article 24) (World Trade Orga-
nization, 1994). The PGI and Protected Designation of Origin (PDO) certifica-
tions in the EU are well recognized in the international market. To distinguish
Thai Hom Mali rice, particularly the products that have a distinct quality from
the generic Hom Mali rice, from its competitors, GI certification labeling was
implemented to build brand recognition. It is known among Thai consumers that
Hom Mali rice from Thung Kula Rong-Hai in northeast Thailand has a special
characteristic; namely, a prominent aroma. Yoshihashi et al. (2004) found that
the KDML105 variety cropped in the rain-fed area of Thung Kula Rong-Hai has
higher 2AP (i.e. the volatile compound in aromatic rice) than rice produced in
other areas. Khao Hom Mali Thung Kula Rong-Hai was registered for GI by the
Department of Property Rights, Ministry of Commerce of Thailand in 2006. It
was then later registered in 2013 for PGI with the European Commission.
Approximately 10 percent all Hom Mali rice is produced in Thung Kula Rong-
Hai, and less than 5 percent of this is certified GI/PGI. Khao Hom Mali Thung
Kula Rong-Hai was promoted by the Thai Government to become PGI certified
with the EU to further differentiate the rice product, which has exceptional char-
acteristics specific to the production site. The hope was that the PGI certification
would help the development of the producing region by providing farmers more
income from the higher premium that Khao Hom Mali Thung Kula Rong-Hai
would hopefully command through a more recognized PGI certification label in
the international market. It became the first rice product outside of Europe to be
registered by the European Commission.
III. Experimental Design

A total of 403 consumers living in Bangkok, the capital city of Thailand, partici-
pated in our experiment. Approximately 20 percent of the national population
lives in Bangkok. The main participants of our experiment were people who
were in their 20s or older and had purchased Thai Hom Mali rice, which is the
target market for the premium quality Khao Hom Mali Thung Kula Rong-Hai
with GI/PGI certification. Given the current high market price of the rice prod-
ucts with geographical certification, household income is one of the most impor-
tant factors to consider when purchasing these rice products. In terms of the
marketing strategies that could expand the market for these products, household
income could also be the most important factors. Therefore, we considered the
income distribution of our target population when we recruited our sample. To

create a sample representative of the income distribution of the Bangkok popula-
tion, 186 consumers were randomly recruited from high-quality grocery stores
(i.e. Golden Places and Top supermarkets), where high-income consumers nor-
mally shop, 147 consumers from medium-quality grocery stores (i.e. Big C and
Tesco Lotus supermarkets), where middle-income consumers normally shop,
and 70 subjects were recruited from conventional fresh markets, where low-
income consumers mostly go to purchase agricultural products.1
The auctioned products were four packs of 1 kg Thai Hom Mali rice, which
differed in their labeling details about geographical information. All products were
labeled with identical Thai Hom Mali rice standard certified by both the Depart-
ment of Internal Trade of Thailand and the Department of Foreign Trade.2 Specif-
ically, ‘Product A’ was Thai Hom Mali rice labeled as being produced in ‘Thung
Kula Rong-Hai’, with certification labels for both GI by Thailand’s Ministry of
Commerce and PGI by the European Commission (see Appendix); ‘Product B’
was Thai Hom Mali rice, labeled as being produced in ‘Thung Kula Rong-Hai’,
with only a GI certification label; ‘Product C’ is Thai Hom Mali rice, labeled as
being produced in ‘Thung Kula Rong-Hai’, without any geographical certification
labels; and ‘product D’ is Thai Hom Mali rice with no label of origin (i.e. no label
indicating where it was produced) and no GI/PGI label. The experiment was com-
posed of two bidding rounds. In the first round, only labeling information and
general explanation about certifications of Thai Hom Mali rice (without any
explanation about geographical certification labeling) was provided to partici-
pants. Then in the second round, additional detailed certification information
about each geographical indication label was given to the participants, including
variety, territory, cultivation practice, restricted area of production, processing and
packaging3. The BDM mechanism was used to elicit consumers’ valuation of the
four types of rice products because this auction method is incentive compatible
and suitable in the field setting (i.e. supermarkets). We also applied the endow-
ment approach, where participants were endowed with one product (i.e. product
D) and were then asked their willingness to pay to exchange the endowed product
with each of the other three products (i.e. products A, B and C).
We set up a booth near the grocery stores and recruited consumers who had
previous experience purchasing Thai Hom Mali rice. Consumers who agreed to
1 Our sample was randomly selected from the target population (i.e. medium to high income
working-class Bangkok consumers who have bought Hom Mali rice; these are the target consumers
of GI/PGI products). Our sample is also representative of the Bangkok population in terms of age
and household size. To further account or control for individual characteristics of respondents in our
analysis, our random effects tobit model in the conditional analysis part of the paper includes demo-
graphic and other attitudinal characteristics.
2 These labels indicate that Hom Mali rice is at least of 92% purity and produced in Thailand.
3 Key information regarding GI and PGI specification is from the registration of products as pro-
vided at http://www.ipthailand.go.th/th/ประกาศโฆษณา/item/ข้าวหอมมะลิทุ่งกุลาร้องไห้.html and https://ec.europa.
eu/agriculture/quality/door/registeredName.html?denominationId=1250.
participate in the experiment were required to sign a consent form and asked to
complete the questionnaire. Upon completion of the questionnaire, participants
were then provided detailed instructions about the experimental auction proce-
dures by the experimenter. Importantly, the participants were informed that their
best strategy was to bid an amount equal to their true values to exchange the
endowed product with the other products. Participants were also paid a partici-
pation fee (100 baht)4 and provided the endowed product (1 kg of normal Thai
Hom Mali rice; i.e. Product D). The average market price for ‘Product D’
(approximately 41.5 baht/kg) was also provided to participants, to serve as a ref-
erence price, before starting the actual auction.
The auctions for rice products started after the subjects fully understood the
auction procedures. Participants were informed that there would be two BDM
auction rounds. They were also told that after the two rounds of auction, a bind-
ing round and a binding product would be determined using a random draw.
Participants were also clearly informed that a price would then be randomly cho-
sen from a predetermined price distribution for the binding product (the price
distribution was based on the difference between the real market prices for prod-
uct D and the alternative product). If their bid was higher than this randomly
drawn price, they would then exchange their endowed product with the binding
product in the randomly chosen binding round and pay the randomly picked
price. If their bid was equal to or lower than the randomly picked price, then
they would not carry out the exchange and would not pay anything.
In the first round, participants were only informed about the labels of each of
the rice products (without detailed information about the meaning of the labels)
and given general information about the certification of Thai Hom Mali rice.
They were then asked to submit bids or indicate willingness to pay to exchange
the product they were endowed with (product D) for the other three rice prod-
ucts (products A, B and C). They were also told that they could bid zero if they
did not want to exchange or were indifferent between the endowed product and
the alternative product. In the second round, participants were provided detailed
information about the certifications of GI and PGI and the indication of origin
from ‘Thung Kula Rong-Hai’. After reading the information, the participants
were again asked their willingness to pay to exchange product D with each of
the alternative rice products (products A, B and C). After completion of the two
auction rounds, the moderator then randomly drew the binding round and the
binding rice product from an envelope.
IV. Experimental Results

Summary statistics of the socio-demographic variables are presented in
Table 1. The average age was approximately 44 years and approximately
4 THB1 = approximately US$0.03.

Table 1 Participants’ socioeconomic characteristics (n = 403)
Variable Categories Mean Standard deviation
Gender 1: Man, 0: Woman 0.25 0.43

Age Years 44.44 13.50
Household size Persons 3.92 1.66
Education High school graduate 45.5%
College graduate 41.2%
Graduate degree 13.3%
Income Less than THB 30 000 19.6%
THB 30 001–60 000 34.5%
THB 60 001–90 000 26.3%
More than THB 90 001 19.6%
Prior awareness 11 1: Yes, 0: No 0.88 0.32
Attitude 14 1: Totally disagree – 5: perfectly agree 3.95 0.81
1
The level of awareness about the indication of ‘Thung Kula Rong-Hai’.
2
The level of awareness about geographical indication (GI) certification label.
3
The level of awareness about protected geographical indication (PGI) certification label.
4
The level of attitude about the indication of ‘Thung Kula Rong-Hai’.
5
The level of attitude about geographical indication (GI) certification label.
6
The level of attitude about protected geographical indication (PGI) certification label.
75 percent of our sample were women. The Bangkok population has an aver-
age age of 46 years and approximately 54 percent of the population are women
(Official Statistic Registration System, 2019). Our sample had a similar aver-
age age, but as women in the households tend to make the majority of rice pur-
chases in Bangkok, our sample had a relatively higher proportion of women
than the Bangkok population. The average number of family members in a
household was approximately 3.9 persons most subjects were high school
graduates or college graduates. Approximately 34.5 percent of the subjects had
an average monthly household income between THB 30 001 and 60 000, and
26.3 percent had an income level between THB60 001 and 90 000. Our sample
had a similar distribution across income groups as the Bangkok population
(see Footnote 1). Approximately 88 percent of the sample were aware of the
rice production region ‘Thung Kula Rong-Hai’. This means that participants
were highly aware of Hom Mali rice produced in the Thung Kula Rong-Hai
region. In contrast, only a relatively small percentage of participants were
aware of GI or PGI labels (0.16 for GI and 0.02 for PGI on a scale of 1 = ‘yes’
and 0 = ‘no’). Nevertheless, on average, participants highly agreed that label-
ing of ‘Thung Kula Rong-Hai’, ‘Geographical Indication (GI)’ and ‘Protected
Geographical Indication (PGI)’ represent a high quality rice (3.95 for ‘Thung
Kula Rong-Hai’ indication, 3.85 for ‘Geographical Indication’ and 3.97 for
‘Protected Geographical Indication’ on a 1 to 5 scale from 1 = ‘totally dis-

agree’ to 5 = ‘perfectly agree’).
Bangkok consumers generally have a positive attitude about geographical cer-
tification labels, even though they generally have low awareness or knowledge
about these labels.
Table 2 describes the distributions of willingness to pay (bids) across rounds.
When participants were given only labeling information, the highest mean bid
was for the rice product with both GI and PGI certifications (product A) at THB
5.85, followed by the rice product with only GI certification label (product B),
and then the rice product that originated from Thung Kula Rong-Hai without
geographical certifications (product C). Based on the mean equality test, the
mean bid differences across the rice products in the first round were statistically
significant (see Table 3). After the second round (i.e. receiving detailed informa-
tion about each certification label), the mean bid for ‘product A’, ‘product B’
and ‘product C’ increased by 65.3, 73.7 and 69.7 percent, respectively.
According to the mean equality tests, the mean differences between the rounds
were statistically significant for each rice product (see Table 4), indicating that
rice consumers value the provision of additional detailed information about geo-
graphical certification labels. The mean bid differences between the rice prod-
ucts were also statistically significant after receiving detailed information about
GI certification in all cases (see Table 3).
The results show that participants always have higher valuation of the rice
product with both GI and PGI certifications, followed by the rice product with
only GI certification, and then the rice product with no geographical identifica-
tion but with indication of origin from ‘Thung Kula Rong-Hai’. The participants
also provided higher bids for the rice products with GI and PGI labels when
they were given more detailed information about the certification labels. The
results suggest that consumers have strong preferences for rice products with
geographical indication labels, especially when both GI and PGI certification
Table 2 Willingness to pay (bid) distribution across information treatments (n = 403)
Information treatment
Only labeling (round 1) Detailed information (round 2)
Product A
Mean 5.85 9.67
Std. dev. 8.46 12.86
Product B
Mean 2.36 4.10
Standard deviation 4.73 7.09
Product C
Mean 0.89 1.51
Standard deviation 2.76 4.37
Table 3 Willingness to pay (bid) comparisons across rice products
Information treatment Bid comparison Mean difference
Only labeling (round 1) H 0 : WTPProductA − WTPProductB = 0 3.49 (10.58)***

H 0 : WTPProductA − WTPProductC = 0 4.96 (12.66)***
H 0 : WTPProductB − WTPProductC = 0 1.47 (8.52)***
Detailed information (round 2) H 0 : WTPProductA − WTPProductB = 0 5.56 (11.75)***
H 0 : WTPProductA − WTPProductC = 0 8.15 (13.41)***
H 0 : WTPProductB − WTPProductC = 0 2.59 (9.29)***
Notes: Values in brackets represent t-statistics. *** signifies that the mean differences are statisti-
cally significant at the 1% significance level.
Table 4 Willingness to pay (bid) comparisons across information rounds
Rice product Bid comparison Mean difference
Product A H 0 : WTPDetailed −WTPOnlyLabel = 0 3.81 (8.37)***

Product B H 0 : WTPDetailed −WTPOnlyLabel = 0 1.74 (6.61)***
Product C H 0 : WTPDetailed −WTPOnlyLabel = 0 0.63 (3.63)***
Notes: Values in brackets represent t-statistics. *** signifies that the mean differences are statisti-
cally significant at the 1% significance level.
labels are present on the product, and that they also value detailed information
about the meaning of GI and PGI certification labels. It is generally recognized
that the EU legislation on GI systems is more comprehensive and trustworthy
compared to the systems in developing countries. Given this, consumers may
have a higher price premium for the rice product with both PGI and GI certifica-
tion compared to the rice product with only Thai GI certification. This indicates
that more stringent regulations for the PGI certification appear to secure a
higher price premium than the less stringent local GI system.
Because the descriptive statistics cannot completely reveal the value differ-
ences across the rice products and the effects of labeling information across
the bidding rounds, we examined the value differences and the effects of infor-
mation on product valuation at the individual level by estimating random
effects panel models. Because we have the same individuals’ bids for each of
the three alternative rice products over bidding rounds, our data have a panel
structure. Given the occurrence of zero bids and the panel nature of our data,
the following random effects tobit models were used to estimate the factors
affecting the premium for each of the three alternative rice products
(products A, B and C):5
5 Data from 5 subjects were excluded from the analysis due to missing information for some vari-
ables used in the regression analysis.
WTPiR = α + β1 R2 + β2 Genderi + β3 Agei + β4 Educationi + β5 HHsizei

+ β6 Incomei + β7 PriorA1i + β8 PriorA2i + β9 PriorA3i ð1Þ
+ β10 Attitude1i + β11 Attitude2i + β12 Attitude3i + ui + ϵiR ,
where WTPiR is individual i’s bid for each rice product (i.e. products A, B and
C) in round R; R2 is a dummy for round 2; Agei, Educationi, HHsizei and Incomei
are individual i’s age, education level, household size and household income level,
respectively; PriorA1i, PriorA2i and PriorA3i are individual i’s prior awareness about
the indication of ‘Thung Kula Rong-Hai’, GI certification and PGI certification,
respectively; Attitude1i, Attitude2i and Attitude3i are individual i’s attitude toward the
indication of ‘Thung Kula Rong-Hai’, GI certification and PGI certification, respec-
tively; ui controls for unobserved individual characteristics; and ϵiR is an independent
and identically distributed component. A model for each of the three alternative prod-
ucts (product A, B and C) was estimated, along with a pooled model (with the addi-
tion in the model of product dummy variables and their interaction with the round
dummy), where data from all products were used in the estimation.
Table 5 exhibits the estimation results for the pooled model and for each of
the three alternative products. The parameter estimates for R2, which repre-
sents the round where participants were given detailed labeling information,
are positive and statistically significant in all three individual product models.
Consistent with the descriptive analysis and related unconditional tests dis-
cussed earlier, the results suggest that the provision of detailed information
has a bigger impact on the premium for ‘product A’, followed by ‘product B’
and then ‘product C’. The pooled model also shows that consumers are willing
to pay higher premiums for the rice product with both GI and PGI certification
labels (product A) and the rice product with only a GI certification label (product
B) than for the rice product with only ‘Thung Kula Rong-Hai’ origin information
(product C). The provision of detailed information about the meaning of each
label also positively affects the premium of each rice product.
Our results also show that age is negatively related to premiums for ‘product
A’ and ‘product B’, while education has a positive impact on the premium for
‘product A’. Participants’ attitudes toward the ‘Thung Kula Rong-Hai’, GI and
PGI certifications positively affect the premium of each rice product, but only
attitudes to the PGI certification and ‘Thung Kula Rong-Hai’ indication are sig-
nificant in products A and B, respectively.
Overall, the results suggest that consumers are willing to pay a premium for
each of the three alternative products, with premiums for the product with both
GI and PGI certification labels ranking highest, followed by the product with
only the GI certification label, and then the product with only the ‘Thung Kula
Rong-Hai’ origin information. These premiums can then be increased or further
enhanced with the provision of detailed information about the meaning of each
of the labels, indicating that there is value in educating Thai consumers, espe-
cially in Bangkok, about the meaning of these labels. Nevertheless, these
Table 5 Random effects tobit regression models of geographical indication premium
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Pooled product A product B product C
Coef. (Std. Err.) Coef. (Std. Err.) Coef. (Std. Err.) Coef. (Std. Err.)
R2 (detailed 3.31 (1.02)*** 6.39 (0.66)*** 4.36 (0.56)*** 2.93 (0.69)***
information)
Gender 1.12 (1.44) 0.13 (1.63) 1.76 (1.46) 1.39 (1.74)
Age −0.08 (0.05)* −0.10 (0.06)* −0.13 (0.05)** 0.01 (0.06)
Education 0.69 (0.40)* 1.39 (0.46)*** 0.08 (0.42) −0.74 (0.49)
Household size −0.50 (0.44) −0.55 (0.49) −0.53 (0.46) 0.23 (0.52)
Income 0.42 (0.37) 0.42 (0.42) 0.55 (0.38) −0.30 (0.45)
Prior awareness 1 0.05 (2.07) 0.75 (2.35) −0.46 (2.09) −0.95 (2.45)
Prior awareness 2 0.73 (1.83) −1.95 (2.09) 1.88 (1.84) 3.44 (2.12)
Prior awareness 3 1.45 (4.44) 6.52 (5.01) −1.76 (4.58) −0.43 (5.39)
Attitude 1 1.22 (0.83) 0.92 (0.94) 1.85 (0.88)** 1.46 (1.04)
Attitude 2 1.30 (1.11) 1.36 (1.26) 0.92 (1.14) 0.95 (1.33)
Attitude 3 2.86 (1.01)*** 4.32 (1.14)*** 1.27 (1.03) 0.36 (1.20)
Intercept −36.2 (5.41)*** −28.2 (6.09)*** −17.2 (5.39)*** −20.6 (6.38)***
Product A 15.19 (0.95)*** — — —
Product B 6.86 (0.98)*** — — —
Product A*R2 3.02 (1.24)** — — —
Product B*R2 1.62 (1.31) — — —
Number of 2388 796 796 796
observations
Log likelihood −4299.19 −2151.52 −1402.18 −762.04
Notes: *, ** and *** represent significance levels at 10, 5, and 1% respectively.
premiums, based on the bids, are still not high enough to reach the current mar-
ket prices of the GI/PGI-labeled rice products in the market.
Identifying consumer welfare change is another way to determine the efficacy
of a new food policy. We thus examined the sensitivity of the consumer welfare
effects of the adoption of both GI and PGI certification labels. Following Lusk
et al. (2005), we first assumed that an individual consumer purchases one unit
of the rice product within a given time period. Before introducing both GI and
PGI certification labels, the rice product with the indication of origin from
‘Thung Kula Rong-Hai’ (‘product C’) and the normal rice product without any
geographical information (‘product D’) were assumed to be available in the mar-
ket. Under this market condition, consumer i derives utility, Ui − PD, from con-
suming ‘product D’, where Ui is consumer i’s maximum willingness to pay for a
unit of the rice product and PD is the price of ‘product D’. Consumer i also
derives utility, U i − PC + cCi , from consuming ‘product C’, where PC is the price
of ‘product C’, and cCi is the premium for the rice product produced in Thung
Kula Rong-Hai6. The consumer also derives utility, Ui − Ps, from consuming a
substitute for Hom Mali rice, where PS is the price of a substitute. Consumer
surplus before introducing GI and PGI certification labels is then given by:

CS Bi = max U i −PD , U i − PC + cCi , U i −PS : ð2Þ
After the introduction of both GI and PGI labels, two additional rice products
are then assumed to become available in the market (i.e. the rice product pro-
duced in Thung Kula Rong-Hai with both GI and PGI certification labels
(‘product A’) and the rice product produced in Thung Kula Rong-Hai with only
a GI certification label (‘product B’)). Consumer i thus derives utility,
U i −PA + cAi , from consuming the rice product produced in Thung Kula Rong-
Hai with both GI and PGI certification labels (‘product A’), where PA is the
price of ‘product A’ and cAi is the premium for the rice product produced in
Thung Kula Rong-Hai with both certification labels. The consumer also derives
utility, U i −PB + cBi , from consuming ‘product B’, where PB is the price of ‘prod-
uct B’ and cBi is the premium for ‘product B’. Thus, consumer surplus after
introducing both GI and PGI certification into the market is estimated as:

CS Ai = max U i −PA + cAi , U i −PB + cBi , U i −PC + cCi , U i − PD , U i −PS : ð3Þ
The change in consumer surplus after the introduction of both GI and PGI
certification labels is estimated as:
ΔCS Ai − B = CS Ai −CS Bi ð4Þ
To simplify our framework, we assumed that Bangkok consumers prefer aro-

matic rice (i.e. Hom Mali rice) to its substitute (i.e. non-aromatic rice)
(Suwannaporn and Linnemann, 2008b; Custodio et al., 2016). To examine the
consumer surplus changes, values for PA, PB, PC, PD, cAi , cBi and cCi should be
determined. We used the average current market price for PA, PB, PC and PD
and used subjects’ average bids for the premiums of each rice product (cAi , cBi
and cCi ). As previously discussed, because one of the potential reasons for the
thin market for rice products with GI and PGI certification is the current high
market price, we analyzed the effect on consumer welfare when the current mar-
ket price is reduced by 5, 10 and 15 percent.
Table 6 presents the changes in average consumer surplus of introducing GI
and PGI certification labels in the Bangkok rice market at the current market
price and when this price is reduced by 5, 10 and 15 percent. The results show
that on average, consumers suffer welfare loss under the current market price,
even with a 5-percent price reduction of the rice product with both GI and PGI
certification labels and the rice product with only GI certification label. They
will, however, gain a positive consumer welfare when the current price is
6 Thai consumers generally know that Hom Mali rice produced in ‘Thung Kula Rong-Hai’ plain
in northeast Thailand has special characteristics (particularly a prominent aroma) and, thus, many
prefer this rice product to other rice products produced in other areas.
Table 6 Changes in consumer surplus of introducing GI and PGI certifications
Original price 5% Decrease 10% Decrease 15% Decrease
Mean −0.147 −0.021 0.149 0.397

Standard deviation 2.218 2.555 3.028 3.622
reduced by 10 or 15 percent. Given that the current high market price of rice prod-
ucts with GI certification is mostly due to the high certification cost of both GI and
PGI by an authorized certification body under the external control system,7 a poten-
tial solution could be the reduction of these certification costs by obtaining the GI
and PGI certification through an internal control system that is less costly. Because
this does not yet exist in the market, policy-makers should perhaps look at the pos-
sibility of introducing an internal control system (e.g. a government/industry spon-
sored certification system in lieu of a 3rd party certification system) that could
reduce certification costs for producers. Based on our findings, educating the public
about the geographical indication labels could also increase consumers’ valuation
of GI/PGI-labeled rice products and, consequently, expand the market.
V. Discussion and Conclusion

Rice is the most important agricultural product in Thailand because it is the
main staple food and one of the country’s major agricultural export products.
Thai Hom Mali rice, commonly known as Jasmine rice, is in demand, with a rel-
atively high price in the international market because of its aroma and softness.
With that factor in mind, Thai Hom Mali rice produced in the area of Thung
Kula Rong-Hai is especially in demand due to its prominent aroma. The Thai
Government has adopted and implemented two types of geographical certifica-
tions for Khao Hom Mali Thung Kula Rong-Hai: geographical indication (GI),
certified by the Department of Property Rights, Ministry of Commerce of
Thailand in 2006, and protected geographical indication (PGI), certified by the
European Commission in 2013. However, both geographical information certifi-
cations have been deemed ineffective for two potential reasons: (i) consumers’
lack of knowledge about both geographical certification systems; and (ii) the
high market price of rice products with GI and PGI labels. To develop strategies
that could increase the demand and expand the market for products with GI cer-
tification labels, premiums that consumers are truly willing to pay for the rice
7 Rice producers who want to obtain GI and PGI certifications need to submit a specific application
and pay THB500 per year. Moreover, to certify the rice product, the whole system, including millers,
must be certified. Therefore, the actual cost is approximately THB 40 000–60 000. The certification of
GI and PGI also requires specific farming processes, aside from location in a geographical area. As a
result, several Hom Mali rice products in the market are not GI certified due to the increasing costs of
certification by a third party and the difficulty of complying with production requirements.
product with geographical indications compared to the conventional rice product

are required. Public responses to additional GI certification labeling information
are also necessary to evaluate the efficacy of informational or educational pro-
grams on the GI labeling schemes. No other study has examined this important
issue in Thailand. Expansion of the market for GI/PGI-labeled rice could help
support the farmers and the communities that grow the rice. Moreover, little
information is available in the literature on this issue in developing countries,
with past related studies having been conducted mostly in developed countries
(i.e. North America and Europe). To fill this void, we conducted non-
hypothetical field experiments using the BDM method to elicit consumers’ valu-
ation of the GI certifications on rice products in Bangkok. We also analyzed the
effect of providing additional detailed information about each certification on
consumers’ valuations. Bangkok is an interesting case to study not just because
it is the capital of a developing country but also because Thailand has acquired
PGI certification for rice from the European Commission.
Our results suggest that Bangkok consumers are willing to pay a premium for
each geographical certification, with the highest premiums for the rice product
with both GI and PGI certifications. Results also suggest that the provision of
more detailed information about the geographical indication labels can further
increase consumers’ valuation of the rice products with geographical certifica-
tions. This finding suggests that Bangkok consumers’ valuation of GI or PGI rice
products can be enhanced by educating rice consumers about the meaning of
these certifications. In addition, our welfare effects analysis, under certain
assumptions, showed that consumers suffer a welfare loss under the current high
market prices and that a price reduction of approximately 10 percent would be
needed to gain consumer welfare from the introduction of both GI and PGI certi-
fication. Nevertheless, GI-certified producers may be reluctant to adjust the price
of certified GI as the cost of certification is expensive, and a very small quantity
of products are produced in Thung Kula Rong-Hai and are GI/PGI certified.
While GI and PGI may help build brand recognition, there are very few certi-
fied products in the market yet. The name ‘Khao Hom Mali Thung Kula Rong-
Hai’ has been well-recognized and was used in the domestic market prior to the
GI certification system. Unlike the EU GI regulation, however, existing GI regu-
lation in Thailand does not prohibit the use of protected GI names in products
that are not GI certified. Our results imply that provision of information about
quality characteristics specific to ‘Thung Kula Rong-Hai’ through the GI and
PGI certification labels can increase consumers’ premium for these certified rice
products in Thailand, especially in Bangkok. Hence, policy initiatives that would
help educate consumers about GI certification would likely help expand the
market for GI products in the country. This would also help farmers use the GI
labels as a tool to differentiate their products in the market.
Importantly, while this study is limited to the case of Bangkok, it is possible
that lessons can be learned from our findings by other developing countries con-
templating the adoption of GI/PGI certification labels in food products. Future
studies, however, should be conducted in other cities or countries to test the

robustness of our findings. This is an important topic given that the adoption of
these GI certification labels could potentially help farmers/producers differenti-
ate and expand the market for their products.
ACKNOWLEDGMENTS
This work was partially supported by the Center for Advanced Studies for Agri-
culture and Food, Institute for Advanced Studies, Kasetsart University Under
the Higher Education Research Promotion and National Research University
Project of Thailand, Office of the Higher Education Commission, Ministry of
Education, Thailand.
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APPENDIX
Certification marks of geographical indication.
Certification of geographical indication

Thai geographical indication (GI) is a certification mark by the Department of
Intellectual Property, Ministry of Commerce of Thailand (Figure A1).
Figure A1 Certification mark of Thai GI

96
Protected Geographical Indication (PGI) is one of the EU Geographical Indica-

tion systems, certified by European Commission (Figure A2).
Figure A2 Certification mark of E.C. PGI

Certification of protected geographical indication
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Asian Economic Journal 2020, Vol. 34 No.

Consumers’ Valuation of Geographical

Ji Yong Lee, Noppawong Pavasopon,

This study investigated consumers’ valuation of geographical indication (GI) and

Keywords: consumer valuation, geographical indication, protected geographical

JEL classification codes: C93, D12, Q13.

*Lee: Department of Agricultural and Resource Economics, Kangwon National University,

facilitate the resolution of market failure caused by asymmetric information

examine consumer welfare change after the introduction of the geographical

II. Khao Hom Mali Thung Kula Rong-Hai

III. Experimental Design

income distribution of our target population when we recruited our sample. To

IV. Experimental Results

4 THB1 = approximately US$0.03.

Table 1 Participants’ socioeconomic characteristics (n = 403)

Variable Categories Mean Standard deviation

Gender 1: Man, 0: Woman 0.25 0.43

‘Protected Geographical Indication’ on a 1 to 5 scale from 1 = ‘totally dis-

Table 2 Willingness to pay (bid) distribution across information treatments (n = 403)

Only labeling (round 1) Detailed information (round 2)

Table 3 Willingness to pay (bid) comparisons across rice products

Information treatment Bid comparison Mean difference

Only labeling (round 1) H 0 : WTPProductA − WTPProductB = 0 3.49 (10.58)***

Table 4 Willingness to pay (bid) comparisons across information rounds

Rice product Bid comparison Mean difference

Product A H 0 : WTPDetailed −WTPOnlyLabel = 0 3.81 (8.37)***

WTPiR = α + β1 R2 + β2 Genderi + β3 Agei + β4 Educationi + β5 HHsizei

Table 5 Random effects tobit regression models of geographical indication premium

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Notes: *, ** and *** represent significance levels at 10, 5, and 1% respectively.

ΔCS Ai − B = CS Ai −CS Bi ð4Þ

To simplify our framework, we assumed that Bangkok consumers prefer aro-

Table 6 Changes in consumer surplus of introducing GI and PGI certifications

Original price 5% Decrease 10% Decrease 15% Decrease

Mean −0.147 −0.021 0.149 0.397

V. Discussion and Conclusion

product with geographical indications compared to the conventional rice product

studies, however, should be conducted in other cities or countries to test the

Certification of geographical indication

Figure A1 Certification mark of Thai GI

Protected Geographical Indication (PGI) is one of the EU Geographical Indica-

Figure A2 Certification mark of E.C. PGI

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Notes: , and represent significance levels at 10, 5, and 1% respectively.