The Consumer Social Network’s Effect on the Price Premium: Evidence from China’s Organic Milk Market

The consumer social network plays an important role in the formation of price premiums for agricultural foods. This study focuses on organic milk products and addresses the following questions: First, how does the consumer social network influence the formation of the price premium for organic milk? Second, what is the underlying mechanism of the consumer social network’s effect on this price premium? Despite existing research on social networks and consumer behavior, there is a limited understanding of the specific mechanisms by which social networks impact price premiums for organic goods. To investigate these issues, we utilized a consumption dataset of organic milk provided by CTR Market Research Co., Ltd. (2015–2021) and employed a two-way fixed effects econometric model that incorporates consumer social network density. The findings revealed that the consumer social network has a significant positive impact on the price premium of organic milk products, potentially accelerating the dissemination of knowledge about these products among consumer groups. Furthermore, feedback from friends has a greater influence on the formation of this price premium compared to input from family and relatives. Notably, the price premium exhibits a “U-shaped” relationship with an increase in the distance within the consumer social network. Overall, this paper is likely to contribute to the existing literature and provide marketers with valuable practical insights.