Friday, January 27, 2012

Peach Preferences?

The New York Times has an article on the rivalry between South Carolina and Georgia peach producers. South Carolina produces more peaches but Georgia producers say their peaches are better tasting. Here is a good example of the difference between producer and consumer preferences. While Georgia producers feel that their produce is better tasting than South Carolina peaches, economically it does not matter. What matters is how consumers view the two states produce. If they view them differently, economists call this product differentiation, if not then the two regions produce is homogeneous.

As stated in the article, “I honestly don’t think you can taste a difference”, which means in economic terms that from the consumers perspective that peaches are homogeneous or there is no preference for one over the other. If consumers cannot tell the difference in taste and do not respond to marketing differences by geographic region or branding, peach prices in each state will tend to converge toward each other as predicted by the competitive market model.

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