Fair Trade Cars? Computers? iPods?
May 19, 2010 10:50 PM   Subscribe

Can you think of examples where a firm tried marketing a more expensive "fair trade" version of a standardized manufactured commodity in parallel?

I was thinking about my "fair trade" coffee I bought earlier today, which was sold next to a cheaper presumably less fairly traded coffee from the same brand.

Then I looked at my iPod. Have any companies tried marketing a parallel "fair trade" version of a standardized manufactured commodities such as this? I know American Apparel and other companies have marketed themselves as providing this alternative, but it's not like my coffee example, where they actually sell the exact same product but with better wages etc. side-by-side with less equitably manufactured ones.

I guess I'm thinking about it almost experimentally. Would people be willing to pay a higher price for more equitable manufacturing practices? How many people and at what price? Are there actual examples where people threw down an extra $2000 for the "super-equitable" station-wagon, which is otherwise the exact same as the ordinary "exploitative" station-wagon? While I imagine someone has written about this, I have no idea what search terms would be applicable (I am not an economist). I am trying to think of specific examples that might approximate such an experiment empirically rather than through contingent valuation surveys, or theoretically, or what-have-you.

Any ideas or examples? Thanks!
posted by eagle-bear to Work & Money (13 answers total) 3 users marked this as a favorite
I guess I'm thinking about it almost experimentally. Would people be willing to pay a higher price for more equitable manufacturing practices?

There are some researchers who have the same questions as you and they've been running these experiments. Here are two articles I'm familiar with that look into this question:

Becchetti, Leonardo and Furio Rosati. 2007. “Global social preferences and the demand for so-
cially responsible products: empirical evidence from a pilot study on fair trade consumers.”
Centre for International Studies on Economic Growth 91:1–34.

Hiscox, Michael and Nicholas Smyth. 2006. “Is There Consumer Demand for Improved Labor
Standards? Evidence from Field Experiments in Social Product Labeling.” Harvard Department
of Government

[If you don't have academic access to these article and want me to email them to you, let me know.]
posted by andoatnp at 11:02 PM on May 19, 2010

One example might be synthetic versus 'real' diamonds. Seeing as how the certifications for non-exploitative and non-conflict diamonds are sometimes not really reliable and the environmental impact of diamond mining is non-trivial, lab-grown diamonds are on the market for what I assume is a premium for natural gems of the same cut and quality. I don't know enough to say whether they're sold side by side anywhere, though.

I have also seen some yarn marketed with copy about sustainable Andean agri-conomy and cultural preservation (but no explicitly fair trade language) sold next to 'generic' wool yarn of pretty much the same weight and fiber type (but iirc slightly different colorways).
posted by cowbellemoo at 12:25 AM on May 20, 2010

Eggs, where I am, come branded in the varieties of "free range", "organic", "barn laid", and "eggs".
posted by Fiasco da Gama at 12:43 AM on May 20, 2010

It's also possible that their coffee has always met the standards for "fair trade" labeling, and they just sell a different variety to get people to pay extra for the same thing.
posted by gjc at 4:44 AM on May 20, 2010

If I was interested in the fair trade version, I don't think I would want to support a company that also had a less fair option. Same with organic, eco, etc. - If the company as a whole doesn't have the values I wish to promote, I'd go with a different brand altogether.
posted by hey you over in the corner at 5:14 AM on May 20, 2010

Milk. My supermarket has regular milk, organic milk, and a "fair trade" version where it's all bought from "local family farmers" and where you're allowed to tour the plants and farms and farmers get bonuses for tastiness and like happy cows or whatever? I don't know too much about how their whole business model actually works (I don't buy a lot of milk), but people I know who are into that trust the company. Anyway, I routinely pay more for the organic, which is a slightly different product, but I know LOTS of people who routinely pay more for the happy cows & family farmers.

Are you interested in only things actually marketed as fair trade? People definitely pay a premium for, say, Italian-made leather shoes, and a large part of that premium is paying for European safety and wage standards, but they're not marketed as fair trade, just as "Italian."
posted by Eyebrows McGee at 6:02 AM on May 20, 2010

Not Fair Trade, but there was the Product (RED) Initiative. I want to recall that the Product (RED) iPod used to cost more than its functionality equivalent non-Product (RED) sibling product.
posted by mmascolino at 6:21 AM on May 20, 2010

Hybrid cars sorta kinda sorta meet the definition.

The consumer can often choose a more-expensive hybrid over a conventional car, with no real difference in the performance of the vehicle (see: hybrid vs. V6 Accord). The overall cost to the consumer usually winds up tilting in the conventional car's favor, so people are paying a premium just for the (arguably) pro-environmental value of the product.
posted by pjaust at 6:48 AM on May 20, 2010

One example I can think of is Whole Foods Bananas. They sell them right next to regular chaquita/dannon bananas. I know at least one person who only buys bananas at Whole Foods because of this.

I think you're going to find "fair trade" used in relation to primary sector products, like imported agricultural products. These people are (at least perceived to be) more at risk then their secondary sector counterparts. (eg, no one demands to know in detail what the coffee roasting company pays their employees, what benefit package they get, etc. People want to picture a farmer with fair treatment). Companies will broadly attempt to have the consumer infer that their employees are happy, but this is mostly just called marketing. One example I can think of is Zappos.com, much of their advertisements are focused on letting you know their employees love their job, and the shoeboxes come with company values like "we are family".

Also something to consider is the "boutique effect". Expensive hand made items (or even non-expensive mass produced items, but marketed as such) will sell for much more in a setting that makes you believe they are better, more ethical, the people involved in their production are happy, etc. So while there may not exactly be a "free trade ipod" there is the implication that your chic-boutique dress made by a local designer is "free trade".
posted by fontophilic at 7:51 AM on May 20, 2010

Hybrids are a great example, pjaust. Highly comparable performance, steep price premium. (To get savings with NPV exceeding the price premium, you have to model many years of driving lots of miles in stop-and-go traffic while gas prices are sky high and make very optimistic terminal value assumptions related to battery life, battery replacement cost, and endurance of hybrid power trains.)
posted by MattD at 7:57 AM on May 20, 2010

Response by poster: Thanks for all the suggestions. Most of them seem to be food products, which I find interesting. Your explanation, fonraphilic, seems plausible. But I wonder why this is, and whether you could successfully tranlate the same kind of strategy used with "free-range" steaks, "fair-trade" coffee, etc. to highly standardized and manufactured commodities, even if examples are currently scarce. I am intrigued by what would happen if Apple rolled out a $100 more expensive iPod and said straight up that 90% of that premium went straight to the workers' wages. Would you bite?

That second paper by andoatnp seems especially informative here. I'll read further into it later this afternoon. Interesting stuff.
posted by eagle-bear at 8:33 AM on May 20, 2010

90% of that premium went straight to the workers' wages

Hmm. This triggered a dim memory of looking for the union label. Its probably not a dead-on example since I don't know what kind of firm could be offering, say, two kinds of shirts, one with the union label and one without. It's more like your American Apparel example.
posted by mhum at 5:17 PM on May 20, 2010

@hey you over in the corner, I often wonder about this, especially when buying eggs, whether to support the small ethical company, or the big one with major market share with a green option, in the hope of supporting ethical practices in within the big company with a major market share. I usually end up buying from the small company, but wonder whether this makes it difficult for the bigger older company to migrate to better practices, if their attempts are less enthusiastically received by consumers than equivalent products from smaller companies
posted by compound eye at 6:14 PM on May 20, 2010

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