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ANALYSIS HEDONIC PRICE FUNCTIONS AND CONSUMER DEMAND FOR ORGANIC
RICE IN CENTRAL JAVA Summary
A. Background
Agricultural system that is characterized by intensive agricultural production by using fertilizer and pesticides, beside gives a beneficial of increased
crop production but also generate negative externalities Othman, 2007. In the future, agriculture will face an increasingly difficult situation such as the
environmental degradation, climate change, and a number of other threats ESCAP, 2009. Furthermore, practice and the adoption of modern intensive agriculture has
serious implications for food security. Sustainable agriculture integrates objectives, such as environmental health,
economic benefits, and social and economic well-being to meet the food needs of the present without ignoring the rights of future generations ESCAP 2009.
Sustainable farming practices include the use of organic and biological nutrients, crop rotation, integrated pest management, and enhancement of biological
diversity. Organic farming is an integral part of sustainable agriculture by providing natural organic matter ILO, 2007. Organic farming emerged in order to
solve a number of environmental issues, safety, and health faced by conventional agriculture Biao, 2003.
The regency of Sragen is one area which is developing organic rice farming that is adequately supported by the local government. Organic rice area in
Sragen in 2008 reached 4,508 acres by more than 380 farmers groups, or about 4 of conventional rice acreage.
Organic food market is still very small, but it is a promising sector. Although the majority of global sales are concentrated in North America and
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Europe, but the organic farming industry experienced an important growth in many countries, and these products now can be found in many retail stores IFOAM
2009. According to SNI 01-6729-2002, organic food is food produced by organic
farm methods that implements management practices in order to maintain ecosystems to achieve sustainable productivity. In the minds of the consumer, the
organic product is better and healthier than the conventional agricultural products. However, an excess of the chemical characteristics of organic products is still being
debated, so the consumption of organic products is driven by the image factor compared with the advantages that are based on scientific evidence Winter, 1996
and Biao, 2003. From the description above, the problems faced in marketing of organic
rice is as follows. 1.
How does the consumer preference and what factor that influence consumer preference towards organic rice.
2. How does the influent of the characteristics of organic rice to that’s price.
3. Does the hedonic price function in the centers of organic rice production have
different structures to region of organic rice marketing. 4.
How does the consumer demand for organic rice and what factors affect the demand for organic rice.
5. Is the demand function of consumer in organic rice production centers has
different structures to the region organic rice marketing.
B. Research Objectives
Generally, this study aims to examine the consumer behavior towards organic rice. Detailed objectives of this study are follows.
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1. Assessing the consumer preference for organic rice and also the factors that
influence to the consumer preference for organic rice. 2.
Examines the characteristics of organic rice which affect toward that’s price. 3.
Examine differences in the structure of the hedonic price function between the consumers of center of organic rice production and the consumer of marketing
area. 4.
Describe consumer demand for organic rice and examine the factors that affect toward the demand for organic rice.
5. Examine differences in the structure of function demand between the consumer
of organic rice production centers and the consumer of marketing area.
C. Literature Review
1. The concept of quality of goods
Product quality is fundamentally expressed as the improved properties compared with normal or standard products. There is general agreement that the
quality has objective and subjective dimension. Objective quality refers to the physical characteristics of the product and in particular the approval of experts,
while the subjective quality is a perceived quality by consumers Gunert, 2005. Products have a number of characteristics that serve as indicators that
represent the quality that is perceived by consumers. Products formed in the intrinsic characteristics and extrinsic Characteristics. Batt, 2007. Based on the
degree of information symmetry between the seller and customer, products can be grouped based on quality characteristics. Nelson 1970 introduced the concept of
search and experience attribute, while Darby and Karni 1970 added the concept of credential attribute. Other quality dimension is Potemkin attribute Acheilleas
and Anastasios, 2008. Sanzo et al., 2003 divides the characteristics of agricultural products based on benefits to consumers, they are i the functional
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