WILLINGNESS TO PAY FOR RICE TRAITS IN KURUNEGALA AND HAMBANTOTA DISTRICTS: AN APPLICATION OF A SPATIAL HEDONIC PRICING MODEL

Abstract

The common understanding by the research community is that farmers like to adopt highyielding varieties. While this is true in general, we often see that some high-yielding varieties are not accepted by farmers. The reasons for such can be many. In this study, an attempt is made to verify whether there are any other traits that farmers seek in a paddy variety. We select several traits including those related to yield and production aspects as well as ultimate consumer preferences, and assess their relative importance by way of willingness to pay. This is achieved by estimating a Hedonic Pricing model. We further hypothesise that there are spatial relations in the willingness to pay for such traits and incorporate that into the analysis which resulted in a Spatial Hedonic Pricing Model. Data for the study was collected by using a pretested questionnaire from 148 farmers in Kurunegala and Hambantota districts. The estimated function confirms that there is a spatial relationship in paddy prices by a significant spatial correlation coefficient in the order of 0.35. Therefore, the estimated marginal willingness to pay values is corrected for the spatial correlation. These estimates provide us insights on characteristics other than yield such as empty seed percentage of seed paddy, disease resistance, and demand conditions of the ultimate consumer(types of rice), that farmers consider in choosing paddy varieties.