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

Abstract

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

What Are People Willing to Pay for Social Sustainability? A Choice Experiment among Dutch Consumers

“…However, this is not without risks. Another study finds that consumers were unable to identify the benefits of fair-trade that are actually transmitted to the farmer [51]. In their study, removing the information bias by providing simple information provision, the WTP decreased.…”

Fairtrade products in retail chains: Case study in the Czech Republic

“…Large multinational companies, including retailers, are often blamed for taking financial and competitive advantages of this system. On the one hand, retailers need to respond to the trend to meet the demand for Fairtrade products (Hellwig et al, 2020). On the other hand, the introduction of the products on supermarket shelves affects the demand and interest in them.…”

“…The higher price and value perceived by consumers is also connected with a feeling of buying a kind of a premium product (Baake et al, 2018). Interestingly, the willingness to pay for such products partly depends on the retailer's perceived level of respect towards the producer rights and the trust in the retailer's social responsibility (Hellwig et al, 2020). Such social responsibility as well as the reatiler´s positive reputation are important factors in attracting consumers (Wang et al, 2022;Pan et al, 2022;Qin et al, 2022;Martiskova et al, 2022).…”