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Do ethical consumers care about price? A revealed preference analysis of fair trade coffee purchases

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  • Chris Arnot
  • Peter Boxall
  • Sean Cash

Abstract

The existing literature on socially responsible purchasing relies heavily on stated preference measures elicited through surveys that utilize hypothetical market choices. This paper explores consumers' revealed purchasing behavior with regard to fair trade coffee and is apparently the first to do so in an actual market setting. In a series of experiments, we investigated differences in consumer responsiveness to relative price changes in fair trade and non-fair trade brewed coffees. In order to minimize the hypothetical bias that may be present in some experimental settings, we conducted our experiments in cooperation with a vendor who allowed us to vary prices in an actual coffee shop. Using a choice model, we found that purchasers of fair trade coffee were much less price responsive than those of other coffee products. The demonstration of low sensitivity to price suggests that the market premiums identified by stated preference studies do indeed exist and are not merely artifacts of hypothetical settings.

Suggested Citation

  • Chris Arnot & Peter Boxall & Sean Cash, 2006. "Do ethical consumers care about price? A revealed preference analysis of fair trade coffee purchases," Natural Field Experiments 00221, The Field Experiments Website.
  • Handle: RePEc:feb:natura:00221
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    References listed on IDEAS

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    1. Larson, Bruce A., 2003. "Eco-labels for credence attributes: the case of shade-grown coffee," Environment and Development Economics, Cambridge University Press, vol. 8(03), pages 529-547, July.
    2. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, March.
    3. Bjorner, Thomas Bue & Hansen, L.G.Lars Garn & Russell, Clifford S., 2004. "Environmental labeling and consumers' choice--an empirical analysis of the effect of the Nordic Swan," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 411-434, May.
    4. Browne, A. W. & Harris, P. J. C. & Hofny-Collins, A. H. & Pasiecznik, N. & Wallace, R. R., 2000. "Organic production and ethical trade: definition, practice and links," Food Policy, Elsevier, vol. 25(1), pages 69-89, February.
    5. David R. Bell & Jeongwen Chiang & V. Padmanabhan, 1999. "The Decomposition of Promotional Response: An Empirical Generalization," Marketing Science, INFORMS, vol. 18(4), pages 504-526.
    6. Bacon, Christopher, 2005. "Confronting the Coffee Crisis: Can Fair Trade, Organic, and Specialty Coffees Reduce Small-Scale Farmer Vulnerability in Northern Nicaragua?," World Development, Elsevier, vol. 33(3), pages 497-511, March.
    7. Lakshman Krishnamurthi & S. P. Raj, 1991. "An Empirical Analysis of the Relationship Between Brand Loyalty and Consumer Price Elasticity," Marketing Science, INFORMS, vol. 10(2), pages 172-183.
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