Reducing Self-Selection Bias in Feeder Cattle Premium Estimates Using Matched Sampling
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Past value-added research employs hedonic pricing models to estimate premiums associated with
value-added feeder cattle characteristics. However, hedonic pricing models require restrictive
assumptions and impose a functional form. Producers also self-select into a treatment group,
potentially biasing estimates. Using propensity score matching, we reduce potential bias from
producer self-selection and from imposing a functional form. Results suggest that hedonic
pricing models may be negatively biased in estimates of premiums received by value-added calf
producers. Current adopters receive a premium of $5.38/cwt from participation in a certified
preconditioning program, while nonadopters would realize $5.17/cwt by adopting certification.
Hedonic model values range from $0.52/cwt to $4.32/cwt, for similar or identical preconditioning
programs.