The Economics of Quality in the Specialty Coffee Industry: Insights from the Cup of Excellence Auction Programs
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This study estimates price determinants for specialty green coffee auctions
using records from the 2004-2010 Cup of Excellence programs hosted by the
Alliance for Coffee Excellence. While most recent literature on coffee has
focused on certifications and sustainability labels, the discussion of price
determinants has been limited in the literature. This paper replicates one of
the first publications on price determinants (Donnet, et al., 2008) and
formulates a new model to more accurately describe the market. We include the
necessary additional variables and estimate the model using a truncated maximum
likelihood estimation technique. While sensory quality has a strong effect on
price, the highest premiums stem from obtaining a top rank compared to other
coffees from the same country, and North American buyers are more responsive to
sensory quality than buyers in Asian and European markets.