Fair trade

Stähler, Frank; Richardson, Martin

Login to OUR Archive using your University of Otago credentials. We have changed how you log into OUR Archive so you will not need to create another account in order to deposit your research outputs. If you have bookmarked the old login page, please update your bookmarks. Note: This change will not affect Thesis Deposit, because an account is not required to submit your e-thesis.

Fair trade

Richardson, Martin; Stähler, Frank

Cite this item: Richardson, M., & Stähler, F. (2007). Fair trade (Economics Discussion Papers Series No. 709). University of Otago. Retrieved from http://hdl.handle.net/10523/1099

Permanent link to OUR Archive version: http://hdl.handle.net/10523/1099

Date: 2007-07

Publisher: University of Otago

Pages: 37

Series: Economics Discussion Papers Series

Series number: 709

Keywords: Fair trade; integration; Imperfect Competition

Research Type: Discussion Paper

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.

Profit-maximizing oligopolists are vertically disintegrated and produce for both markets and the fair trade firm can charge a premium to consumers due to a “warm glow effect” 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.

JEL-Classification: F12.

Show full item record