Resource title

Consumer demand for the fair trade label: evidence from a field experiment

Resource image

image for OpenScout resource :: Consumer demand for the fair trade label: evidence from a field experiment

Resource description

A majority of surveyed consumers claim to prefer ethically certified products over non-certified alternatives, and to be willing to pay a price premium for such products. There is no clear evidence, however, that people actually seek out such ethically certified goods and pay a premium for them when shopping. We provide new evidence on consumer behavior from experiments conducted in a major U.S. grocery store chain. We find that the Fair Trade label has a substantial positive effect on sales. Sales of the two most popular bulk coffees sold in the stores rose by almost 10% when the coffees were labeled as Fair Trade. Demand for the higher priced coffee was inelastic: sales of the labeled coffee remained steady when its price was raised by 8%. Demand for the lower priced coffee was more elastic: a 9% increase in its price led to a 30% decline in sales, as buyers switched to low-priced unlabeled alternatives. Overall the findings suggest that there is substantial consumer support for Fair Trade, although a segment of price-sensitive shoppers will not pay a large premium for the Fair Trade label.

Resource author

Resource publisher

Resource publish date

Resource language

en

Resource content type

Resource resource URL

http://eprints.lse.ac.uk/41302/

Resource license