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The Impact of Social Preferences and Information on the Willingness to Pay for Fairtrade Products

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Abstract

This paper investigates the impact of social preferences and information about the value chain on the willingness to pay (WTP) for Fairtrade products. More specifically, the perceived social and economic benefits for Fairtrade farmers are analyzed in order to study whether altruistic preferences or information biases may shift consumers’ WTP. By means of an online survey, the empirical analysis is carried out for the coffee market. After grouping and comparing participants with respect to their WTP, social preferences, and demographic backgrounds, we find some evidence that consumers wrongly estimate, and lack information on, the financial benefits of Fairtrade certification that are eventually allocated to the coffee farmers. Large multinational enterprises often seem to make use of the Fairtrade system in order to gain financial and competitive advantages by “fairwashing” their products. This demonstrably leads to a higher WTP for an ethical premium that is not necessarily justified.

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  • Hellwig, Robert & Atasoy, Ayse Tugba & Madlener, Reinhard, 2020. "The Impact of Social Preferences and Information on the Willingness to Pay for Fairtrade Products," FCN Working Papers 6/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    • Handle: RePEc:ris:fcnwpa:2020_006
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    2. Raluca Dragusanu & Daniele Giovannucci & Nathan Nunn, 2014. "The Economics of Fair Trade," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 217-236, Summer.
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    5. Shyekhha, Siamak & Borggrefe, Frieder & Madlener, Reinhard, 2019. "A Counterfactual Analysis of Regional Renewable Energy Auctions Taking the Spatial Dimension into Account," FCN Working Papers 22/2019, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
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    8. Karami, Mahdi & Madlener, Reinhard, 2019. "Smart Predictive Maintenance Strategy Based on Cyber-Physical Systems for Centrifugal Pumps: A Bearing Vibration Analysis," FCN Working Papers 14/2019, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    9. Crump, Robert & Madlener, Reinhard, 2019. "Modeling Grid-Friendly Clean Energy Communities and Induced Intra-Community Cash Flows," FCN Working Papers 26/2019, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    10. Liu, Xueying & Madlener, Reinhard, 2021. "The sky is the limit: Assessing aircraft market diffusion with agent-based modeling," Journal of Air Transport Management, Elsevier, vol. 96(C).
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    12. Barbara Glensk & Reinhard Madlener, 2019. "Energiewende @ Risk: On the Continuation of Renewable Power Generation at the End of Public Policy Support," Energies, MDPI, vol. 12(19), pages 1-25, September.
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    14. Helene Naegele, 2019. "Where Does the Fairtrade Money Go? How Much Consumers Pay Extra for Fairtrade Coffee and How This Value Is Split along the Value Chain," Discussion Papers of DIW Berlin 1783, DIW Berlin, German Institute for Economic Research.
    15. Höfer, Tim & Madlener, Reinhard, 2020. "A participatory stakeholder process for evaluating sustainable energy transition scenarios," Energy Policy, Elsevier, vol. 139(C).
    16. Liu, Xueying & Madlener, Reinhard, 2019. "Get Ready for Take-Off: A Two-Stage Model of Aircraft Market Diffusion," FCN Working Papers 15/2019, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
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    Cited by:

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    4. Fenna Arnoldussen & Mark J. Koetse & Sander M. de Bruyn & Onno Kuik, 2022. "What Are People Willing to Pay for Social Sustainability? A Choice Experiment among Dutch Consumers," Sustainability, MDPI, vol. 14(21), pages 1-21, November.
    5. Balzarova, Michaela & Dyer, Celia & Falta, Michael, 2022. "Perceptions of blockchain readiness for fairtrade programmes," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    6. Fabianek, Paul & Glensk, Barbara & Madlener, Reinhard, 2021. "A Sequential Real Options Analysis for Renewable Power-to-Hydrogen Plants in Germany and California," FCN Working Papers 1/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    7. Liu, Xueying & Madlener, Reinhard, 2021. "Economic Benefits of Direct Current Technology for Private Households and Peer-to-Peer Trading in Germany," FCN Working Papers 7/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    8. Walter, Antonia & Held, Maximilian & Pareschi, Giacomo & Pengg, Hermann & Madlener, Reinhard, 2020. "Decarbonizing the European Automobile Fleet: Impacts of 1.5 °C-compliant Climate Policies in Germany and Norway," FCN Working Papers 18/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

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    More about this item

    Keywords

    Social preferences; Willingness to pay; Fairtrade; Coffee market; Tobit model;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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