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So how much do you pay for ethical consumption? Estimating the hedonic price for Fair Trade coffee in Sweden

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  • Schollenberg, Linda

    (Hanken School of Economics)

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    Abstract

    This study applies the method of hedonic pricing to estimate the impact of the Fair Trade-label on the market for coffee in Sweden. Over the past decades, the general public interest in products bearing some environmental or social responsibility label has grown considerably in the EU, and Sweden is one of the countries where public awareness of labelling issues is particularly high. The sale of labelled products in regular supermarkets has increased significantly in Sweden but despite growing supply and acceptance, a lot remains to be understood about the market. This study takes a revealed preference approach using weekly scanner sales panel data recently made available by Nielsen and the Swedish Retail Institute (HUI). A representative sample of grocery stores all over Sweden is covered, as well as all major brands supplying roasted coffee. Hedonic estimates are obtained for what consumers pay for different characteristics as accessible from the package. Results point to a considerable premium of 38% paid for Fair Trade coffee, underlining high public awareness reflected in the retailers’ pricing policy.

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    Bibliographic Info

    Paper provided by HUI Research in its series HUI Working Papers with number 31.

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    Length: 28 pages
    Date of creation: 08 Jul 2011
    Date of revision:
    Handle: RePEc:hhs:huiwps:0031

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    Postal: HUI Research, Regeringsgatan 60, 103 29 Stockholm, Sweden
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    Related research

    Keywords: Fair Trade; coffee; eco-labels; hedonic pricing; ethical consumption;

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    References

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    1. G¸nter Schamel & Kym Anderson, 2003. "Wine Quality and Varietal, Regional and Winery Reputations: Hedonic Prices for Australia and New Zealand," The Economic Record, The Economic Society of Australia, vol. 79(246), pages 357-369, 09.
    2. Chris Arnot & Peter C. Boxall & Sean B. Cash, 2006. "Do Ethical Consumers Care About Price? A Revealed Preference Analysis of Fair Trade Coffee Purchases," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(4), pages 555-565, December.
    3. Thunström, Linda, 2007. "The Marginal Willingness-to-Pay for Health Related Food Characteristics," HUI Working Papers 12, HUI Research.
    4. Basu, Arnab K. & Hicks, Robert L., 2008. "Label Performance and the Willingness to Pay for Fair Trade Coffee: A Cross-National Perspective," Discussion Papers 44336, University of Bonn, Center for Development Research (ZEF).
    5. Galarraga, Ibon & Markandya, Anil, 2004. "Economic techniques to estimate the demand for sustainable products: a case study for fair trade and organic coffee in the United Kingdom," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 4(07).
    6. repec:feb:natura:0061 is not listed on IDEAS
    7. Henrik Andersson, 2005. "The Value of Safety as Revealed in the Swedish Car Market: An Application of the Hedonic Pricing Approach," Journal of Risk and Uncertainty, Springer, vol. 30(3), pages 211-239, May.
    8. Torsten Steinrücken & Sebastian Jaenichen, 2007. "The Fair Trade Idea: Towards an Economics of Social Labels," Journal of Consumer Policy, Springer, vol. 30(3), pages 201-217, September.
    9. Sanja Lutzeyer, 2008. "Estimating Hedonic Prices for Stellenbosch wine," Working Papers 15/2008, Stellenbosch University, Department of Economics.
    10. John Wilkinson, 2007. "Fair Trade: Dynamic and Dilemmas of a Market Oriented Global Social Movement," Journal of Consumer Policy, Springer, vol. 30(3), pages 219-239, September.
    11. William F. Hahn & Kenneth H. Mathews, 2007. "Characteristics and hedonic pricing of differentiated beef demands," Agricultural Economics, International Association of Agricultural Economists, vol. 36(3), pages 377-393, 05.
    12. Durevall, Dick, 2007. "Demand for coffee in Sweden: The role of prices, preferences and market power," Food Policy, Elsevier, vol. 32(5-6), pages 566-584.
    13. Marco Costanigro & Jill J. McCluskey & Ron C. Mittelhammer, 2007. "Segmenting the Wine Market Based on Price: Hedonic Regression when Different Prices mean Different Products," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(3), pages 454-466, 09.
    14. Sarah Lyon, 2007. "Fair Trade Coffee and Human Rights in Guatemala," Journal of Consumer Policy, Springer, vol. 30(3), pages 241-261, September.
    15. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    16. Thunström, Linda, 2007. "The Marginal Willingness-to-Pay for Health Related Food Characteristics," UmeÃ¥ Economic Studies 724, Umeå University, Department of Economics.
    17. Loureiro, Maria L. & Lotade, Justus, 2005. "Do fair trade and eco-labels in coffee wake up the consumer conscience?," Ecological Economics, Elsevier, vol. 53(1), pages 129-138, April.
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