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Fair Trade Labeling: Inside or Outside Supermarkets?

Author

Listed:
  • Poret Sylvaine

    (INRA-LORIA & Ecole Polytechnique)

  • Chambolle Claire

    (INRA-LORIA & Ecole Polytechnique)

Abstract

This article is a theoretical contribution to the debate surrounding the introduction of Fair Trade products into large-scale retail distribution. In the model, a Fair Trade certifier and a traditional producer compete to supply their product to a single retailer, consumers who are Fair Trade likers are willing to pay an "ethical" premium for the Fair Trade product, and the premium depends on the revenue of Fair Trade product producers. The conditions of existence of an equilibrium where the Fair Trade product coexists with the traditional brand product on the retailer's shelves are highlighted. In particular, we show that a Fair Trade certifier implements this equilibrium if his preferences are such that the weight devoted to the price paid to producers is smaller than the weight he grants to the quantities of Fair Trade product sold. We also show that a retailer's decision to sell the Fair Trade product is not based on the percentage of consumers who are willing to pay for it, but on how much the Fair Trade likers are willing to pay.

Suggested Citation

  • Poret Sylvaine & Chambolle Claire, 2007. "Fair Trade Labeling: Inside or Outside Supermarkets?," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(1), pages 1-24, November.
  • Handle: RePEc:bpj:bjafio:v:5:y:2007:i:1:n:9
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    References listed on IDEAS

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    1. Masten, Scott E & Crocker, Keith J, 1985. "Efficient Adaptation in Long-term Contracts: Take-or-Pay Provisions for Natural Gas," American Economic Review, American Economic Association, vol. 75(5), pages 1083-1093, December.
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    Cited by:

    1. Claire Chambolle & Sylvaine Poret, 2009. "Fair Trade Contracts for Some, an Insurance for Others," Working Papers hal-00367500, HAL.
    2. Leonardo Becchetti, 2012. "Voting with the wallet," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), pages 245-268.
    3. Suphanit Piyapromdee & Russell Hillberry & Donald MacLaren, 2014. "‘Fair trade’ coffee and the mitigation of local oligopsony power," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 41(4), pages 537-559.
    4. Kadow, Alexander, 2011. "The Fair Trade movement: an economic perspective," SIRE Discussion Papers 2011-10, Scottish Institute for Research in Economics (SIRE).
    5. Chambolle, Claire & Poret, Sylvaine, 2008. "Guaranteed Minimum Price Contracts for Some, an Insurance for Others?," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44134, European Association of Agricultural Economists.

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