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Do consumers value employee ownership? Evidence from an experimental auction

Philip Pablo Mellizo (Department of Economics, The College of Wooster, Wooster, Ohio, USA)

Journal of Participation and Employee Ownership

ISSN: 2514-7641

Article publication date: 7 September 2018

Issue publication date: 6 November 2018

220

Abstract

Purpose

The purpose of this paper is to evaluate how the public at large perceives employee ownership, and how public perceptions of employee ownership translate into consumer valuation of goods and/or services produced by employee-owned firms. To the extent that consumer interest regarding the governance and ownership structure of firms matters in their purchasing decision, an employee-owned certification label could be an instrument by firms to segment consumer demand, differentiate products and potentially realize a competitive advantage.

Design/methodology/approach

Three specific questions are evaluated using the fifth price, experimental Vickrey valuation auction. First, the author obtains estimates of willingness to pay (WTP) premia for a specific item (coffee) differentiated in a controlled setting by the certifications labels that signal various non-market attributes. Specifically, the author examines the WTP premium for coffee that is eligible for the Certified Employee-OwnedSM label, the Fair Trade CertifiedTM Certified label, as well coffee that qualifies for both labels. Second, the author introduces a treatment to evaluate how the provision of information produced by the third party certifiers affects WTP estimates. And third, the author exploits the use of a controlled setting to evaluate how passive sensory information (i.e. taste) may influence the WTP valuation of the labels.

Findings

WTP premia for coffee carrying only the EO label only increase by 67 cents relative to conventional coffee, which was not significantly different from zero. Bids for both FT and EO&FT labeled coffee were, however, positive ($1.22 and $2.17, respectively) and are also statistically significant. The circulation of information to subjects about the certification programs resulted in increased bids. These bid differences were statistically significant for FT and EOFT coffee, but again, not for EO labeled coffee. Finally, differences in tastes did not appear to drive significant differences in bidding behavior, suggesting that WTP consumer decisions are strongly influenced by non-market attributes.

Originality/value

Marketers, economists and others have an interest in determining the monetary value individuals place on non-market goods for a variety of reasons; from forecasting new product success to understanding consumer and individual behavior. Unfortunately, many currently available stated preference techniques suffer from hypothetical bias while revealed preference techniques rely on indirect measures. Experimental auctions mitigate some of these issues since they involve individuals exchanging real money for real goods in an active market. WTP valuation has been conducted on a wide variety or products, but none that capture consumer valuation of employee ownership.

Keywords

Acknowledgements

The author of this paper has not made their research data set openly available. Any enquiries regarding the data set can be directed to the corresponding author.

The author would like to thank to Shephan Kroll, Emily Foley, Erik Olsen, Fidan Kurtulus, Thomas Dudley, and the participants at the 2017 Beyster Summer Symposium for valuable feedback on early versions of this research. The author also grateful to the three anonymous referees for providing excellent comments that improved the manuscript and also to Charlie Holt and Mary Spencer for their help in conducting the experiment sessions and the Kauffman Fund for sponsoring the data collection. The project received IRB approval (Protocol No. 2017/05/1) at the College of Wooster. All errors are the author’s own.

Citation

Mellizo, P.P. (2018), "Do consumers value employee ownership? Evidence from an experimental auction", Journal of Participation and Employee Ownership, Vol. 1 No. 2/3, pp. 162-190. https://doi.org/10.1108/JPEO-10-2017-0001

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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