Fair Trade

Martin Richardson and Frank Stähler

The Economic Record, 2014, vol. 90, issue 291, 447-461

Abstract: This paper analyses a setting in which a vertically integrated fair-trade 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.

Date: 2014
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Related works:
Chapter: Fair Trade (2017)
Working Paper: Fair Trade (2007)
Working Paper: Fair Trade (2007)
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