Template-Type: ReDIF-Paper 1.0

Author-Name: Andreas Graichen
Author-X-Name-First: Andreas
Author-X-Name-Last: Graichen

Title: 	Fairtrade Labelling in a Bertrand Competition Model with Monopsony Power
	
Abstract: This model examines the impact of a fairtrade labelling scheme on global and
country-specific welfare in a two-stage north-south trade framework. In the first
stage (the producer market) two northern processors buy a commodity from a group
of small–scale agricultural producers in the south producing the commodity under
perfect competitive market conditions. One of the processors buys a conventional
produced commodity and uses its monopsony power to cut the commodity’s price.
The second processor is a fairtrade processor, i.e. meets the necessary requirements
for being awarded a fairtrade label like paying a minimum price for the commodity
to the producers and a license fee to the labelling organization. In the second stage
(the consumer market) both firms are processing the commodity and selling their
products to the northern consumers. The price is determined by Bertrand compe-
tition. Consuming a labelled product is assumed to generate additional utility on
behalf of a warm glow effect. I show how changes of certain parameters crucial to
the fairtrade system influence welfare in both the northern and the southern country.
Length:  37 pages
Creation-Date:  2008-04
File-URL: http://www.bgpe.de/texte/DP/050_graichen.pdf
File-Format: Application/pdf
File-Function: First version, 2008
Number: 050
Classification-JEL: F13; L13; L31
Keywords: Fairtrade, Bertrand Competition, Duopsony, Warm Glow
Handle: RePEc:bav:wpaper:050_graichen