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Contagious "Social Market Enterprises": The Role of Fair Traders


  • Leonardo Becchetti

    () ("Tor Vergata" University, Rome)

  • Giuseppina Gianfreda

    () (University of Tuscia, Viterbo)


One of the effects of the introduction of fair trade goods is that of triggering socially responsible imitation of profit maximising sellers and distributors, thereby creating a consumer driven market mechanism which promotes equity and inclusion. To proof ourclaim we analyze the effects of a fair trader’s entry in a differentiation model where the profit maximizing incumbent mayreact in prices and social responsibility and its position on the segment of social responsibility needs to be advertised at some cost. We outline complementarity and substitution effects among relevant variables and explore incumbent’s incentives to cheat on his ethical stance.

Suggested Citation

  • Leonardo Becchetti & Giuseppina Gianfreda, 2007. "Contagious "Social Market Enterprises": The Role of Fair Traders," Rivista di Politica Economica, SIPI Spa, vol. 97(3), pages 51-84, May-June.
  • Handle: RePEc:rpo:ripoec:v:97:y:2007:i:3:p:51-84

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    Cited by:

    1. Becchetti, Leonardo & Palestini, Arsen & Solferino, Nazaria & Elisabetta Tessitore, M., 2014. "The socially responsible choice in a duopolistic market: A dynamic model of “ethical product” differentiation," Economic Modelling, Elsevier, vol. 43(C), pages 114-123.
    2. Solferino, Nazaria & Taurino, SerenaFiona & Tessitore, M.Elisabetta, 2016. "Boosting cooperation between agents in diverse groups: a dynamical model of prosocial behavior, free-riding and coercive solutions," MPRA Paper 71283, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship


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