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Margins of Fair Trade Wines Along the Supply Chain: Evidence from South African Wine on the U.S. Market

Author

Listed:
  • Back, Robin M.
  • Niklas,Britta
  • Liu, Xinyang
  • Storchmann, Karl
  • Vink, Nick

Abstract

In this paper, we analyze profit margins and mark-ups of Fair Trade (FT) wines sold in the United States. We are particularly interested in whether and to what extent the FT cost impulse in production is passed on along the supply chain. We draw on a limited sample of about 470 South African wines sold in Connecticut and New Jersey in the fall of 2016; about 90 of them are certified FT. For these wines we have FOB export prices, wholesale prices, and retail prices, which allows us to compute wholesale and retail margins and analyze the FT treatment effect. We run OLS, 2SLS and Propensity Score Matching models and find evidence of asymmetrical pricing behavior. While wholesalers seem to fully pass-through the FT cost effect, retailers appear to amplify the cost effect. As a result, at the retail level, FT wines yield significantly higher margins than their non-FT counterparts

Suggested Citation

  • Back, Robin M. & Niklas,Britta & Liu, Xinyang & Storchmann, Karl & Vink, Nick, 2019. "Margins of Fair Trade Wines Along the Supply Chain: Evidence from South African Wine on the U.S. Market," Working Papers 295015, American Association of Wine Economists.
    • Handle: RePEc:ags:aawewp:295015
    DOI: 10.22004/ag.econ.295015
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    Cited by:

    1. Niklas, Britta, 2024. "The effect of South African wine certifications on price premiums and marginal costs: A two-stage hedonic approach," Economic Modelling, Elsevier, vol. 132(C).

    More about this item

    Keywords

    Agricultural and Food Policy; Industrial Organization;

    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
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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