Date of Award

Summer 8-2021

Level of Access Assigned by Author

Open-Access Thesis

Degree Name

Master of Science (MS)

Department

Economics

Advisor

Jonathan Malacarne

Second Committee Member

Kathleen Bell

Third Committee Member

Timothy Waring

Abstract

In this thesis, I investigate the roles of both consumers and producers in the emergence of traited (i.e. local and organic) goods markets in Maine. I discuss welfare changes after differentiation of the market as well as the impact of changing consumer preferences on market outcomes.

The first chapter motivates the emergence of traited goods markets—as consumers try to satisfy their preferences and producers seek to increase incomes.

The second chapter explores the market for traited goods in Maine, focusing on the evolution of consumer preferences. A market differentiation framework is used to consider factors that impact total welfare changes in differentiated agricultural markets. The fraction of consumers who transition to the new market, the number of consumers in the market, and the price of the differentiated good are a few of the factors found to influence the magnitude and sign of welfare changes after differentiation. The chapter ends by discussing the costs of production and the decision facing producers when the costs of producing a trait involve substantive production changes.

The third chapter of this thesis uses an agent-based model (ABM) to simulate the evolution of consumer preferences through learning. The ABM models a market of consumers who undergo two types of learning (experiential and social) and adjust their preferences according to what they have learned. Consumers make a purchase decision each week based off of their current preferences for a total of 5 years. Results from the simulations show that learning has significant impact on preferences and market outcome. Social learning facilitates the spread of information shocks and general trends. Experiential learning (when set to occur only after an experience with local food), resulted in lower average preferences market-wide because it can result in consumers exiting the local food market but does not provide a pathway for new consumers to enter.. The long-term impact of shocks to the market is found to be related to the level of learning present within the system. With more active learning, the effects of the shocks die out more quickly.

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