CONSUMER DEMAND FOR FAIR TRADE: EVIDENCE FROM A MULTISTORE FIELD EXPERIMENT

We provide new evidence on consumer demand for ethical products from experiments conducted in a U.S. grocery store chain. We find that sales of the two most popular coffees rose by almost 10% when they carried a Fair Trade label as compared to a generic placebo label. Demand for the higher-priced co...

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Bibliographic Details
Published in:The review of economics and statistics 2015-05, Vol.97 (2), p.242-256
Main Authors: Hainmueller, Jens, Hiscox, Michael J., Sequeira, Sandra
Format: Article
Language:English
Subjects:
Consumer demand
Demand analysis
Descriptive labeling
Economic analysis
Economic theory
Ethics
Fair trade
Grocery stores
Studies
U.S.A
Willingness to pay
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Summary:We provide new evidence on consumer demand for ethical products from experiments conducted in a U.S. grocery store chain. We find that sales of the two most popular coffees rose by almost 10% when they carried a Fair Trade label as compared to a generic placebo label. Demand for the higher-priced coffee remained steady when its price was raised by 8%, but demand for the lower-priced coffee was elastic: a 9% price increase led to a 30% decline in sales. While consumers attach value to ethical sourcing, there is significant heterogeneity in willingness to pay for it.
ISSN:0034-6535
1530-9142
DOI:10.1162/REST_a_00467