'Fair trade' coffee and the mitigation of local oligopsony power

Piyapromdee, Suphanit; Hillberry, Russell; MacLaren, Donald

doi:10.1093/erae/jbt028

Cited by 16 publications

(9 citation statements)

References 5 publications

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“…Another factor can explain a range of WTS—the lack of substitutability between products (Hanemann, ). Market power can also impact values (Piyapromdee, Hillberry, & MacLaren, ; Tedeschi and Carlson, ).…”

Section: Introductionmentioning

confidence: 99%

“…Furthermore, if the relationship between SRP and the cost of production wasn't relatively constant across the industry, we'd observe a consolidation of production rather than an expansion due to firms pricing themselves out of competition. In addition, the market structure at certifier, manufacturer and retailer stages has been argued to exhibit oligopolistic and oligopsony power, with maximization of firm (manufacturer) surplus being a central goal (Piyapromdee, Hillberry, & MacLaren, ). As such, SRP can be used as a reasonable proxy for producer WTS of fair trade goods, at least at the introduction of the new food or beverage item if not later in the product life cycle.…”

Section: Introductionmentioning

confidence: 99%

“…In commodity markets such as coffee, tea, and perhaps chocolate, there are minimal potential production differences. In addition, supply of products of this nature has been demonstrated to be price inelastic (Piyapromdee, Hillberry, & MacLaren, ). Various product prices would then by and large be due to the differences in certification and co‐branding costs.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

What's in a Name? The Impact of Fair Trade Claims on Product Price

2016

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Agribusinesses use credence claims reporting the sustainability of products and supply chains. One example, fair trade, relies on a diverse set of third party standards and certification organizations. Food marketing data are used to compare products launched between 1999 and 2013 in the coffee, tea, and chocolate categories. Out of 3,257 observations making a reference to fair trade, 2,745 were certified. The other items follow certain fair trade practices or support fair trade. Many products claim both fair trade and organic (congruent claim). Fairtrade Labeling Organizations -International (FLO-I) certifiers dominate, but Fair Trade USA (breaking from FLO-I in 2012) is important. A double hurdle hedonic regression model explores the relationship between claims and suggested retail price in the United States, Canada, and European Union over two periods (1999-2011 and 2012-2013). Two models are run, one aggregating non-FLO-I members and one accounting for each individual certifier. The models (first hurdle) are not able to identify factors explaining which products are certified. Results suggest (second hurdle) that after controlling for congruent claims, having a fair trade claim certified by certain third parties significantly raises the price (above an uncertified product). In particular FLO-I certification leads to a higher price in all models in both periods. Conversely, there is a range of premia for non-FLO-I certifiers, not all statistically significant. Implications for stakeholders are advanced.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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What's in a Name? The Impact of Fair Trade Claims on Product Price

2016

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“…Piyapromdee et al . () develop an oligopsony model with an upward‐sloping input supply curve in which FT firms maximise a linear combination of producer surplus and profits. They show in a calibration that the existence of FT firms will drive up producer incomes, but only by a small margin.…”

Section: Introductionmentioning

confidence: 99%

“…See Piyapromdee et al . (). See also Becchetti and Adriani () where the FT firm contracts with the farmers with the lowest outside options, thus driving up the prices that must be paid by the oligopoly firms.…”

mentioning

confidence: 97%

Fair Trade

Richardson

Stähler

2014

Economic Record

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This paper analyses a setting in which a vertically integrated fairtrade firm competes against vertically disintegrated, profit-maximising oligopolists. Consumers of the fair-trade product derive a 'warm glow' that depends on the wage paid to fair-trade producers; the firm returns all surplus to its farmers. Trade integration will unambiguously increase the size of the fair-trade firm, but the relative size compared to oligopolists may shrink. Furthermore, we show that the 'warm glow' effect may support a marginal expansion of the volume of fair trade, but for rather perverse reasons.

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