Fair Trade

Martin Richardson and Frank Staehler ()
Additional contact information
Frank Staehler: Department of Economics, University of Otago
Authors registered in the RePEc Author Service: Frank Stähler

No 709, Working Papers from University of Otago, Department of Economics

Abstract: This paper deals with the behavior of fair trade organizations in an oligopolistic setting in which the vertically integrated fair trade firm produces a commodity which is a weak substitute for another commodity. ProÞt-maximizing oligopolists are vertically disintegrated and produce for both markets and the fair trade firm can charge a premium to consumers due to a Òwarm glow effectÓ that depends on the wage paid to fair trade producers. We show that trade integration will unambiguously increase the size of the fair trade firm. However, the relative size compared to oligopolists shrinks with integration. The effect of a change in substitutability between the two commodities on markets shares depends on the relative market potential. Furthermore, we show that the warm glow effect does not support an expansion of the volume of fair trade.

Keywords: Fair trade; integration; imperfect competition (search for similar items in EconPapers)
JEL-codes: F12 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2007-07, Revised 2007-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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