Efficient Consumer Altruism and Fair Trade Products∗
نویسندگان
چکیده
Yearly sales of “fair trade” products exceeds $2.3 billion worldwide. Consumers who are altruistic and rational will choose these product-donation bundles when the bundle is cheaper than its elements. Assume a supplier’s investment reduces retailers’ costs (or improves quality), but this investment is non-verifiable, hence sub-optimal even with infinitely-repeated interaction. A retailer paying the supplier more can induce greater investment while benefiting from consumers’ altruism towards the supplier. Thus, the bundle is produced at a lower cost (and under perfect competition will be cheaper) than its elements. We provide evidence for this model in the context of the coffee industry. JEL Classification: D11, D64, D86
منابع مشابه
Efficient Consumer Altruism and Fair Trade
Consumers have shown a willingness to pay a premium for products labeled as “Fair Trade,” and to prefer retailers that are seen as more generous to their suppliers/employees. A fair trade product is essentially a bundle of a base product and a donation to the supplier (e.g., a coffee farmer). An altruistic rational consumer will only choose this bundle if doing so is less expensive than buying ...
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