Eliciting the reservation price of halal product: a laboratory experiment in Indonesia

Purpose This study aims to thoroughly examine consumer awareness of halal products by investigating the reservation price for halal products through a laboratory experiment in Indonesia. Design/methodology/approach The authors adopt the multiple price list method to elicit the reservation price and explore individual valuation to halal products using an incentivised economic experiment. The authors model the individual choice and estimate behavioural preferences (risk and ambiguity aversion), as well as estimating the determinants of the individual reservation price. Findings The participants exhibit a certain behavioural pattern in which non-halal products are valued higher than those of halal products based on price ratio (subjective valuation against product price). The additional benefits of the halal products do not appear to be perceived in a linear comparison with non-halal products. Research limitations/implications This study focuses on the demand side, using university members as participants under a within-design experiment, which may limit the scope of investigation. Future research could extend the analysis to the supply side to help understand the impact of halal certification through a randomised control trial design. Practical implications This raises an important issue of consumer trust in halal products, especially within Indonesian culture, where “being halal” should be officially recognised by the authorities. The government needs to understand its market to enhance the halal market. Originality/value This study investigates consumer’s reservation prices for halal products (both certified and self-claimed) compared to non-halal products using a laboratory economic experiment. The authors complement the existing literature – mostly focused on the supply side through survey methods – by examining the demand side of the halal industry.