Consumer Demand for Ethical Products and the Role of Cultural Worldviews: The Case of Direct-Trade Coffee

Ethically-labeled products – those that address environmental and human-welfare issues – are increasingly prevalent in consumer decision-making. This research estimates the value consumers place on direct trade coffee, a relatively new and complex ethical product. Direct trade coffee is defined by having three attributes that differentiate it from standard coffee: (i) price premiums are paid directly to farmers; (ii) harvesting practices are sustainable; and (iii) the quality of the product is enhanced. The first two attributes of direct trade coffee lead to social benefits while the third is strictly a private benefit. Using a discrete-choice experiment, we find that consumers are willing to pay significant premiums for each of the three attributes, and are willing to pay slightly more for those attributes with social benefits. While we find evidence of heterogeneity in responses, cultural worldviews do not appear to play a significant role in shaping consumers’ values for direct trade coffee. Key Words: ethically-labeled products, impure public goods, direct trade coffee, discrete choice experiments,