Abstract
We examine the operations, fairness, and social implications of fair trade certified products. We consider the market for fair trade certified products, which may serve as a substitute to a regular product. A fair trade organization chooses standards for the certification, namely, the (unit) premium and minimum fraction of fair trade raw materials, to maximize the total premium transferred to farmers. We analyze the operations of various stakeholders in the fair trade value chain, as well as the role and social welfare of fair trade organizations with different philosophies. We characterize the firms’ entry decision in the fair trade market as well as the resulting market equilibrium. Furthermore, we examine the impact of mainstreaming, i.e., whether to allow large-scale plantations (often owned by large corporates) to be eligible for fair trade certification or not, which is one of the most discussed topics in the fair trade movement. We also identify the welfare allocation among various stakeholders in the value chain under different certification policies, and thereby address the fairness issue of the fair trade market as well as its resulting social welfare implications. Finally, we obtain a number of policy insights and suggestions to support this nascent marketplace.
| Original language | English |
|---|---|
| Pages (from-to) | 3023-3041 |
| Number of pages | 19 |
| Journal | Production and Operations Management |
| Volume | 28 |
| Issue number | 12 |
| DOIs | |
| Publication status | Published - 2019 Dec 1 |
Bibliographical note
Funding Information:The authors thank the editors and two anonymous referees for their helpful suggestions and insightful comments on previous versions of this study. In addition, the authors thank Mr. Jean-Jacques Grauhar, the President of Fairtrade International Europe-Korea Foundation, for providing various information and perspective on the fair trade market practice. We also appreciate various help and comments provided by the Fairtrade International office during the development of this study. Finally, Michael K. Lim acknowledges the support by Creative-Pioneering Researchers Program through Seoul National University and the Institute of Management Research at Seoul National University.
Funding Information:
The authors thank the editors and two anonymous referees for their helpful suggestions and insightful comments on previous versions of this study. In addition, the authors thank Mr. Jean‐Jacques Grauhar, the President of Fairtrade International Europe‐Korea Foundation, for providing various information and perspective on the fair trade market practice. We also appreciate various help and comments provided by the Fairtrade International office during the development of this study. Finally, Michael K. Lim acknowledges the support by Creative‐Pioneering Researchers Program through Seoul National University and the Institute of Management Research at Seoul National University.
Publisher Copyright:
© 2019 Production and Operations Management Society
All Science Journal Classification (ASJC) codes
- Management Science and Operations Research
- Industrial and Manufacturing Engineering
- Management of Technology and Innovation
