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Fair Trade Contracts for Some, an Insurance for Others

Claire Chambolle () and Sylvaine Poret ()

Working Papers from HAL

Abstract: This article analyzes the impact of Fair Trade contracts between sub-groups of farmers and a Fair Trade organization on the spot market price. We analyze a three level vertical chain gathering perfectly competitive farmers upstream who offer their raw product on a spot market to manufacturers who then sell finished products to a downstream retailer. Absent Fair Trade, the entire raw product is sold on the spot market. When a Fair Trade organization offers a Fair Trade contract to a sub-group of farmers, it gathers a Guaranteed Minimum Price clause and a straight relationship between the sub-group of farmers and the retailer. This article highlights several conditions such that a snowball effect exists, i.e farmers outside of the Fair Trade contract also benefit from a higher spot market price.

Keywords: Guaranteed Minimum Price Contracts; Disintermediation; Fair Trade; Vertical Chain; Two-part Tariff Contracts (search for similar items in EconPapers)
Date: 2009-03-11
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00367500
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