 Daniel Toro-Gonzalez researches consumer
preferences for beer and mint gum; hops and mint are
two important Washington crops. (Photo by Ericka Duncan)
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PULLMAN, Wash. – When you’re standing in the beer aisle at the local supermarket, how do you decide what to buy? Besides the observable characteristics, like price, packaging and the color of the beer, what are the unobservable characteristics that are important to you? With dozens of beers to choose from, what constellation of factors – both observable and not – determines your final choice?
Quantifying those unknown characteristics goes to the heart of Daniel Toro-Gonzalez’s research. A Fulbright International Student Scholar at Washington State University, he will discuss his work in a WSU Fulbright Academy talk at 4 p.m. Tuesday, Feb. 14, in the Honors College lounge.
Rich diversity open to new ideas
Toro-Gonzalez, who arrived in Pullman in 2008 from Cartagena, Colombia, is a graduate student in economics. His advisor, Jill McCluskey, professor in the School of Economic Sciences (SES), will join him for the Fulbright lecture.
“The Fulbright program has been fantastic for the School of Economic Sciences,” McCluskey said, adding that SES has both domestic students and international students from all over the world. Through the Fulbright program, the school has enrolled outstanding students from Latin America, especially Colombia.
“This adds to an international culture and rich diversity in our graduate programs,” she said. “This diversity creates an environment that is open to new ideas and creativity.”
Methodology applicable to many areas
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Mint quality unobserved,
but it matters to consumers What do consumers really want in a pack of gum? More specifically, if they like mint gum, does it matter if the flavor is strong or lasts a long time?
When Daniel Toro-Gonzalez was awarded a Fulbright Scholarship to study in the United States, he knew he wanted to study economics and consumer behaviors, but he had no idea he’d be studying the buying preferences of mint gum lovers.
The problem, he said, is that mint grown in the Pacific Northwest is superior in quality to mint grown overseas, but it is also more expensive. Gum manufacturers in the U.S. have begun supplementing high-quality U.S. mint with less expensive imports, and mint producers in the Pacific Northwest are taking notice.
If gum manufacturers continue to substitute lower quality imported mint oil for the domestic product, mint growers in the Pacific Northwest face a bleak future, so they asked WSU to investigate. Toro-Gonzalez developed a research project to analyze the factors that affect mint gum consumption – with a particular focus on the importance of the mint flavor. The observable factors in gum choice include flavor, the shape of the gum, the packaging and the sugar content. The unobservable factors include the flavor quality and how long the flavor lasts, and those factors are difficult to measure. According to Toro-Gonzalez, his research allowed him to indirectly capture all the non-observable factors and include them in the analysis. As it turns out, he said, product quality is very important and does help explain the market share that each flavor of gum earns.
“We estimate that approximately 47 percent of the variation in consumption is explained by the unobserved product quality,” he said. The message to Pacific Northwest mint oil producers, he said, is that consumers do value high quality mint and are willing to pay extra to get it. Since that is the case, it is unlikely that gum manufacturers will forgo the high quality mint altogether in favor of the lower quality imports.
Toro-Gonzalez’s research was conducted in collaboration with SES assistant professors Jia Yan and Karina Gallardo and SES professor Jill McCluskey. The work is part of a multi-year, multi-institution, transdisciplinary coordinated agricultural project sponsored by the U.S. Department of Agriculture and the National Institute of Food and Agriculture (NIFA) to study the impacts of stress on Pacific Northwest flavor crops. For more information, go here.
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Toro-Gonzalez’s dissertation applies economic tools – from industrial organization and econometrics – to analyze markets for products that are available in different quality levels. But the quality is often difficult to measure.
So far he has focused on beer and mint flavored gum. Hops and mint are both important to Washington agriculture.
His work to apply a methodology for capturing unobserved product attributes has applications in marketing, retail sales, manufacturing and agriculture, he said. Those same principals also can be used to guide public policy – and that’s an area Toro-Gonzalez hopes to pursue when he returns to Cartagena.
Unobserved information influences consumers
In the past, he said, researchers have studied price and other observable characteristics to try to predict what consumers will buy. But there is ample research to show that, even when the data shows consumers are going to prefer product x, a sizable percentage instead choose product a, b or c.
That data isn’t wrong, he said, it’s just incomplete. Toro-Gonzalez said he is most interested in working out methodology to predict consumer behavior when it is difficult for researchers to observe all the information consumers consider when buying.
Since fall 2010, Toro-Gonzalez has been working to understand why consumers choose one beer over another.
“It’s not necessarily just price,” he said. “In fact, if it was just price, people would just consume regular American lager, which is cheaper than craft beer.” But, he said, the market possibilities for craft and artisan beers are huge and their market share is growing.
Technology, productivity, resource use
Toro-Gonzalez had been teaching and doing research in Cartagena at the Universidad Tecnologica de Bolivar when he applied to the Fulbright program. He first was attracted to WSU’s research on transportation, but then decided to look at issues of consumer preference more broadly.
Toro-Gonzalez was funded by the Fulbright program for three years and has received external funding for his final year.
In addition to his research with McCluskey, Toro-Gonzalez also conducted research with Seung Mo Choi, SES assistant professor, on technological investments and productivity growth. He presented his work in December 2010 at a conference in Berkeley, Calif.
He also took a three-month leave from WSU to work as a consultant at the Inter-American Development Bank. While there, he pursued a project to help developing countries make efficient use of resources that governments receive from the exploitation of non-renewable natural resources.
Completing studies in May
Toro-Gonzalez’s wife, Ericka Duncan, did not speak English when she arrived in Pullman but immediately started classes at the Intensive American Language Center. In May, when Toro-Gonzalez plans to complete his doctorate degree, Duncan will earn her master’s degree in foreign languages and cultures.
For more information about the WSU Fulbright Academy, click here.
Next speaker Feb. 28
Keri McCarthy, assistant professor of oboe, will be the Fulbright Academy speaker on Feb. 28. She spent 2011 in Thailand, teaching and conducting research on the relationships between Thai traditional and art music at Chulalongkorn University in Bangkok.