Do Ethical Consumers Care About Price? A Revealed Preference Analysis of Fair Trade Coffee Purchases

Abstract

"The existing literature on socially responsible purchasing relies heavily on stated preference measures elicited through surveys that utilize hypothetical market choices. This paper explores consumers' revealed purchasing behavior with regard to fair trade coffee and is apparently the first to do so in an actual market setting. In a series of experiments, we investigated differences in consumer responsiveness to relative price changes in fair trade and non-fair trade brewed coffees. In order to minimize the hypothetical bias that may be present in some experimental settings, we conducted our experiments in cooperation with a vendor who allowed us to vary prices in an actual coffee shop. Using a choice model, we found that purchasers of fair trade coffee were much less price responsive than those of other coffee products. The demonstration of low sensitivity to price suggests that the market premiums identified by stated preference studies do indeed exist and are not merely artifacts of hypothetical settings." Copyright 2006 Canadian Agricultural Economics Society.

Effects of corporate social responsibility and irresponsibility policies

“…Nearly 500 buyers were observed and interviewed. Demand for the fair trade variety was much less sensitive to price changes (Arnot, Boxall, and Cash, 2006). The Fair Trade approach should not be regarded as a CSR panacea, however.…”

The relationship between young people׳s transit use and their perceptions of equity concepts in transit service provision

“…Growing numbers of consumers are increasingly concerned about fairness for themselves as well as others through socially responsible consumption (e.g., Arnot et al, 2006;Reinstein and Song, 2012;Webb et al, 2008). Evidence shows that customer loyalty, willingness to pay and purchase intentions are associated with perceived fairness, because consumers are willing to pay higher prices, associate higher quality and switch to products that are linked to social corporate responsibility and fair trade (e.g., Martin et al, 2009;Reinstein and Song, 2012; e.g., Lotz et al, 2013).…”

An experimental study of corporate social responsibility through charitable giving in Bertrand markets

“…analysis as adding data points from the second seller would artificially double the data and foster significance of effects because they exactly mirror the data points of seller 1. As independent variables we use ∆price = posted price 1 -posted price 2 and ∆donation = announced donation 1 -announced donation 2 in the respective period. Table 3: Logit regression estimates (clustered standard errors in parentheses); dependent variable "1 = seller 1 sold strictly more units than seller 2, 0 = otherwise"; levels of significance: p<0.01 (***), p<0.05 (**), p<0.1 (*) a) marginal effect of price difference (∆price) for fixed donation differences (x-axis) b) marginal effect of donation difference (∆donation) for fixed price differences (x-axis) Figure 3: marginal effects of the independent variables at different relevant values of the respective other independent variable; levels of significance: p<0.01 (***), p<0.05 (**), p<0.1 (*)…”

“…Arnot et al (2006) find in a field experiment at a coffee shop that buyers of fair trade coffee were much less responsive to relative price differences than purchasers of other coffee products.…”

“…customers who either do or do not have preferences for CSR in form of a contribution to a public good. 2 Their analysis results in a unique separating equilibrium where firms 2 The notion that donations to charity can be interpreted as a contribution to a public good is also referred to by e.g. 4 serve either one of both types of customers, i.e.…”