Willingness-To-Pay for Fairtrade Products: How Different Information About Tariffs Influences Consumer Choice

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Consumer willingness-to-pay (WTP) for Fairtrade products is an important topic in international economics that examines the demand side of the market for ethically sourced goods. Under Fairtrade, consumers who buy labeled products typically pay more than market prices and some portion of this price premium goes towards bettering the terms of trade for producers who are considered marginalized. The purpose of this research will be to examine how consumer WTP for Fairtrade products changes under different pricing given the introduction of new information regarding the accounting of tariffs in the price premium. This paper also seeks to examine the relationship between charity and consumer utility and how much consumers are willing to pay for a Fairtrade product before deciding that the price premium is not justified. Additionally, this paper will use consumer choice and demand as a way of determining whether consumers exhibit faith in the government to resolve global socioeconomic issues. The results from the statistical and economic models I present show that consumers already have a preference for the Fairtrade product under a system of no information other than price and label, that this preference strengthens after being presented with a price breakdown of import tax and producer contribution amount, and that this preference becomes even greater when told that the US government will use the tax revenue towards international development programs. The warm glow effect and the utility consumers receive from making a charitable purchase is also pronounced, and consumers also indicate a considerable trust for the government through their market choices.
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