Fairtrade Labelling in a Bertrand Competition Model with Monopsony Power

Andreas Graichen ()

No 50, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: This model examines the impact of a fairtrade labelling scheme on global and country-specific welfare in a two-stage north-south trade framework. In the first stage (the producer market) two northern processors buy a commodity from a group of small–scale agricultural producers in the south producing the commodity under perfect competitive market conditions. One of the processors buys a conventional produced commodity and uses its monopsony power to cut the commodity’s price. The second processor is a fairtrade processor, i.e. meets the necessary requirements for being awarded a fairtrade label like paying a minimum price for the commodity to the producers and a license fee to the labelling organization. In the second stage (the consumer market) both firms are processing the commodity and selling their products to the northern consumers. The price is determined by Bertrand compe- tition. Consuming a labelled product is assumed to generate additional utility on behalf of a warm glow effect. I show how changes of certain parameters crucial to the fairtrade system influence welfare in both the northern and the southern country.

Keywords: Fairtrade; Bertrand Competition; Duopsony; Warm Glow (search for similar items in EconPapers)
JEL-codes: F13 L13 L31 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://bgpe.cms.rrze.uni-erlangen.de/files/2023/0 ... -Monopsony-Power.pdf First version, 2008 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bav:wpaper:050_graichen

Access Statistics for this paper

More papers in Working Papers from Bavarian Graduate Program in Economics (BGPE) Contact information at EDIRC.
Bibliographic data for series maintained by Anton Barabasch ().