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When fairtrade contracts for some are profitable for others

Claire Chambolle () and Sylvaine Poret ()

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Abstract: We analyse a vertical chain with perfectly competitive farmers who offer raw products on a spot market to manufacturers who resell the finished goods to a distributor. Absent Fairtrade, the entire raw product is sold on the spot market. A Fairtrade organisation can offer to part of farmers a contract consisting of a guaranteed minimum price and a direct relationship with a distributor. A snowball effect arises when farmers who are not involved in Fairtrade benefit from a higher spot price. This article highlights several mechanisms, either linked to the demand or the market structure, that may explain this snowball effect.

Keywords: fair trade; guaranteed minimum price; disintermediation; vertical chain; contract (search for similar items in EconPapers)
Date: 2013
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Published in European Review of Agricultural Economics, Oxford University Press (OUP), 2013, 40 (5), pp.835-871. ⟨10.1093/erae/jbs039⟩

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DOI: 10.1093/erae/jbs039

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