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Label Performance and the Willingness to Pay for Fair Trade Coffee: A Cross-National Perspective


  • Basu, Arnab K.
  • Hicks, Robert L.


In this paper we investigate how label information detailing the performance of the Fair Trade labeling program with respect to coffee affect consumers’ willingness to pay in the United States and in Germany. We provide respondents (University students in the U.S and Germany) information regarding hypothetical benefits of the Fair Trade Coffee program on its intended beneficiaries on the production side (the revenue gains to participating marginal farmers (scope of the program)), and using stated preference conjoint methods test how this performance criterion relates to the willingness to pay for Fair Trade Coffee. Our empirical results identify a “threshold'' property of performance-based labels. In effect, the willingness-to-pay for performance-based Fair Trade labeled coffee exhibits an inverted-U shape in the sense that the willingness to pay is positively related to the scope of the program, but only up to a critical level. Thereafter, the willingness to pay declines as the income gains to participating growers increases further. Interestingly, this inverted-U property is exhibited by both the U.S. and German respondents with different critical thresholds.

Suggested Citation

  • 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).
  • Handle: RePEc:ags:ubzefd:44336

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    2. Cerjak, Marija & Naglić, Tatjana & Mesić, Željka & Tomić, Marina, 2015. "Croatian consumers' knowledge and attitudes towards Fair Trade," 143rd Joint EAAE/AAEA Seminar, March 25-27, 2015, Naples, Italy 202756, European Association of Agricultural Economists.
    3. Rotaris Lucia & Danielis Romeo, 2011. "Willingness to Pay for Fair Trade Coffee: A Conjoint Analysis Experiment with Italian Consumers," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 9(1), pages 1-22, June.
    4. Hannes Koppel & Günther Schulze, 2013. "The Importance of the Indirect Transfer Mechanism for Consumer Willingness to Pay for Fair Trade Products—Evidence from a Natural Field Experiment," Journal of Consumer Policy, Springer, vol. 36(4), pages 369-387, December.
    5. Chiu, Leslie J. Verteramo & Gomez, Miguel I. & Liaukonyte, Jura & Kaiser, Harry M., 2015. "Socially Responsible Products: What Motivates Consumers to Pay a Premium?," 2016 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2016, San Francisco, California 212829, Agricultural and Applied Economics Association.
    6. Yamamoto, Wataru, 2013. "Negative economic consequences of ethical campaigns?: Market data evidence," MPRA Paper 49070, University Library of Munich, Germany.
    7. Wang, Xiaojin, 2016. "Is Fair Trade Fair for Consumers? A Hedonic Analysis of U.S. Retail Fair Trade Coffee Prices," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236344, Agricultural and Applied Economics Association.
    8. Chiputwa, Brian & Spielman, David J. & Qaim, Matin, 2015. "Food Standards, Certification, and Poverty among Coffee Farmers in Uganda," World Development, Elsevier, vol. 66(C), pages 400-412.
    9. Nancy Chau & Hideaki Goto & Ravi Kanbur, 2016. "Middlemen, fair traders, and poverty," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(1), pages 81-108, March.
    10. Fabrice Etilé & Sabrina Teyssier, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 94(2), pages 221-259.
    11. Van Loo, Ellen J. & Caputo, Vincenzina & Nayga, Rodolfo M. & Seo, Han-Seok & Zhang, Baoyue & Verbeke, Wim, 2015. "Sustainability labels on coffee: Consumer preferences, willingness-to-pay and visual attention to attributes," Ecological Economics, Elsevier, vol. 118(C), pages 215-225.
    12. Pio Baake & Helene Naegele, 2017. "Competition between For-Profit and Industry Labels: The Case of Social Labels in the Coffee Market," Discussion Papers of DIW Berlin 1686, DIW Berlin, German Institute for Economic Research.
    13. Tait, Dr Peter & Saunders, Prof Caroline & Guenther, Meike & Rutherford, Paul, 2013. "Valuing environmental sustainability attributes of food products in India and China: decomposing the value of New Zealand’s ‘Clean-Green’ brand," 2013 Conference, August 28-30, 2013, Christchurch, New Zealand 187036, New Zealand Agricultural and Resource Economics Society.
    14. Veronika A. Andorfer & Ulf Liebe, 2014. "Do Information, Price, or Morals Influence Ethical Consumption? A Natural Field Experiment and Customer Survey on the Purchase of Fair Trade Coffee," University of Bern Social Sciences Working Papers 6, University of Bern, Department of Social Sciences.
    15. Yang, Shang-Ho & Hu, Wuyang & Mupandawana, Malvern & Liu, Yun, 2012. "Consumer Willingness to Pay for Fair Trade Coffee: A Chinese Case Study," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(01), February.
    16. Takahashi, Ryo & Todo, Yasuyuki, 2013. "Impact of a Shade Coffee Certification Program on Forest Conservation:A Case Study from a Wild Coffee Forest in Ethiopia," Working Papers 55, JICA Research Institute.
    17. Merel, Pierre R. & Saitone, Tina L. & Sexton, Richard J., 2009. "Cooperatives and Quality-Differentiated Markets: Strengths, Weaknesses, and Modeling Approaches," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 37(2).
    18. Veronika Andorfer & Ulf Liebe, 2012. "Research on Fair Trade Consumption—A Review," Journal of Business Ethics, Springer, vol. 106(4), pages 415-435, April.
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    21. Rosa Schleenbecker & Ulrich Hamm, 2015. "Information Needs for a Purchase of Fairtrade Coffee," Sustainability, MDPI, Open Access Journal, vol. 7(5), pages 1-19, May.
    22. van Kempen, Luuk & Muradian, Roldan & Sandóval, César & Castañeda, Juan-Pablo, 2009. "Too poor to be green consumers? A field experiment on revealed preferences for firewood in rural Guatemala," Ecological Economics, Elsevier, vol. 68(7), pages 2160-2167, May.
    23. Schollenberg, Linda, 2011. "So how much do you pay for ethical consumption? Estimating the hedonic price for Fair Trade coffee in Sweden," HUI Working Papers 31, HUI Research.
    24. Verteramo Chiu, Leslie J. & Gómez, Miguel I. & Kaiser, Harry M. & Yan, Jubo, 2014. "Socially-Responsible Certification Schemes for Smallholder Coffee Farmers: Economics of Giving and Consumer Utility," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170551, Agricultural and Applied Economics Association.
    25. Akaichi, Faical & Grauw, Steven de & Darmon, Paul, 2015. "Are Fair Trade, Carbon Footprint and Organic Attributes competing? Some Evidences from Scotland, Netherland and France," 2015 Conference, August 9-14, 2015, Milan, Italy 210940, International Association of Agricultural Economists.

    More about this item


    Fair Trade; labeling program; consumer; Consumer/Household Economics; International Relations/Trade; F13; E21;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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