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

Hainmueller, Jens, Hiscox, Michael J. and Sequeira, Sandra (2011) Consumer demand for the fair trade label: evidence from a field experiment. The authors. (Unpublished)

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Abstract

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.

Item Type: Monograph (Other)
Additional Information: © 2011 The authors
Library of Congress subject classification: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
Journal of Economic Literature Classification System: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments
D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
Sets: Departments > International Development
Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 11 Jan 2012 10:05
URL: http://eprints.lse.ac.uk/41302/

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