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

FCN Working Paper No. 6/2020

37 Pages Posted: 30 Sep 2020

See all articles by Robert Hellwig

Robert Hellwig

RWTH Aachen University

Ayse Tugba Atasoy

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN)

Reinhard Madlener

RWTH Aachen University; Norwegian University of Science and Technology (NTNU) - Department of Industrial Economics and Technology Management

Date Written: May 1, 2020

Abstract

This paper investigates the impact of social preferences and information about the value chain on the willingness to pay (WTP) for Fair-trade products. More specifically, the perceived social and economic benefits for Fair-trade 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 Fair-trade certification that are eventually allocated to the coffee farmers. Large multinational enterprises often seem to make use of the Fair-trade system in order to gain financial and competitive advantages by “fair-washing” their products. This demonstrably leads to a higher WTP for an ethical premium that is not necessarily justified.

Keywords: Social Preferences, Willingness to Pay, Fair-Trade, Coffee Market, Tobit Model

JEL Classification: Q56, Q01, D83, D63, O13

Suggested Citation

Hellwig, Robert and Atasoy, Ayse Tugba and Madlener, Reinhard, The Impact of Social Preferences and Information on the Willingness to Pay for Fairtrade Products (May 1, 2020). FCN Working Paper No. 6/2020, Available at SSRN: https://ssrn.com/abstract=3686521 or http://dx.doi.org/10.2139/ssrn.3686521

Robert Hellwig

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

HOME PAGE: http://https://www.rwth-aachen.de

Ayse Tugba Atasoy

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN) ( email )

Mathieustrasse 6
Aachen, 52074
Germany

Norwegian University of Science and Technology (NTNU) - Department of Industrial Economics and Technology Management ( email )

HOME PAGE: http://https://www.ntnu.edu/employees/reinhard.madlener

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