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Abstract

In this paper we present the results of a contingent valuation study and an experimental approach to estimating the willingness to pay for fresh milk produced in the consumer's own region. In contrast to the fictitious contingent valuation study, responses in the experimental investigation are connected with real demand decisions and real financial payoffs in an incentive-compatible way. The experimental setup allows to quantify the bias in stated willingness to pay that results from the contingent valuation’s hypothetical character. In essence, the data suggest that there exists a considerable demand for milk from the consumers` home region. Yet, significantly less demand is found in the experimental investigation. At the same time, subjects accept significantly higher mark-ups for regional provenance of ecologically produced milk compared to regional provenance of conventionally produced milk. However, the convex shape of aggregate demand indicates that there is a substantial demand for fresh milk of the consumers` home region only when mark-ups are fairly low.

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