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Fair Trade Contracts for Some, an Insurance for Others

Author

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  • Claire Chambolle

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique)

  • Sylvaine Poret

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique)

Abstract

This article analyzes the impact of Fair Trade contracts between sub-groups of farmers and a Fair Trade organization on the spot market price. We analyze a three level vertical chain gathering perfectly competitive farmers upstream who offer their raw product on a spot market to manufacturers who then sell finished products to a downstream retailer. Absent Fair Trade, the entire raw product is sold on the spot market. When a Fair Trade organization offers a Fair Trade contract to a sub-group of farmers, it gathers a Guaranteed Minimum Price clause and a straight relationship between the sub-group of farmers and the retailer. This article highlights several conditions such that a snowball effect exists, i.e farmers outside of the Fair Trade contract also benefit from a higher spot market price.

Suggested Citation

  • Claire Chambolle & Sylvaine Poret, 2009. "Fair Trade Contracts for Some, an Insurance for Others," Working Papers hal-00367500, HAL.
    • Handle: RePEc:hal:wpaper:hal-00367500
    Note: View the original document on HAL open archive server: https://hal.science/hal-00367500
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    References listed on IDEAS

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    More about this item

    Keywords

    Guaranteed Minimum Price Contracts; Disintermediation; Fair Trade; Vertical Chain; Two-part Tariff Contracts;
    All these keywords.

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