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What role does information play for fair trade consumption?

News: Mar 28, 2018

Are consumers interested how much producers benefit from fair trade products? Based on a laboratory experiment, Simon Felgendreher, behavioural economist at the School of Business, Economics and Law, University of Gothenburg, found that consumers are not willing to spend extra time or money to learn more about the impact of their purchase.



Fair trade products generally come with a higher price for the consumer as a premium that is partly paid to the farmer or producer in a developing country. But as a consumer you don’t really know how large this fair trade share is and how it really benefits the producer.

"So I wanted to find out whether individuals want to access additional information about ethical certificates when making a product choice. My hypothesis was that certain consumers consciously avoid information about the effectiveness of ethical certificates to improve the living conditions of primary good producers", says Simon Felgendreher.

What did you find?

"I found that individuals in the laboratory experiment do not ignore costless information about ethical certificates in a systematic manner. However, once a small price for information is introduced, only very few individuals are willing to pay it. This highlights that in the case of ethically certified goods, consumers are probably not very willing to spent money or time to get informed about the impact of such certificates."

Why would a consumer pay for information, that should be free, shouldn’t it?

"The cost that consumers could have in reality are most likely not monetary, in contrast to the setting in the experiment. But if people in reality have to spend a minute reading additional product information in the supermarket or search for additional information on the internet, this might lead to an "opportunity cost" for them, in the sense that they cannot spend this time on something else: work, leisure etc. In the experiment it was easiest to make it a monetary cost.

How did you conduct the experiment?

"I conducted the experiment in a computer laboratory at the University of Munich. Most of the participants were students who had signed up voluntarily to take part and earn a small amount of money. Their earning depended on the choices they made. So even though the certificate I used in the experiment was invented, it had real consequences for the participants. Also the money that I raised for payments to the invented certificate was transferred to a hospital in Ethiopia.

Why is topic this interesting?

"I was interested in the topic since previous studies had shown that individuals in specific situations prefer to forgoe additional information, even though it is potentially beneficial to them. For example, by deciding to stay consciously ignorant, individuals can avoid uncomfortable feelings of not helping others and protect their self-image."

But couldn't fair trade consumption be a way to boost your self-image as being caring and altruistic?

"Yes, this is certainly true for some consumers who are willing to pay a higher price in order to show to others and themselves that they are caring and altruistic. However, in the experiment I was mainly interested in studying the behaviour of another group, namely those who do not want to pay more."

"My hypothesis was that some consumers consciously avoid information about the effectiveness of ethical certificates to improve the living conditions of primary good producers. The underlying idea is that certain consumers do not want to spend extra money on fair trade products, but at the same time they do not want to be seen, or see themselves, as selfish and stingy either. Therefore, the easiest way to solve the dilemma can be to avoid any additional information that has the potential to increase the moral burden of their decisions."

What can we learn from this study?

"The study shows that individuals are often not willing to spend much, also in terms of time, on accessing information that reveals them the consequences of their actions on others. This result is also in line with other studies that analysed similar situations. I think this is in important fact when designing for instance information campaigns for ethically certified goods", says Simon Felgendreher.

The study 'Do consumer choose to stay ignorant? The role of information in the purchase ethically certified products' is the second chapter in Simon Felgendreher's doctoral thesis, which was defended 23 March 2018 at the School of Business, Economics and Law, University of Gothenburg.

Link to Simon Felgendreher's thesis in Gupea

 

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Originally published on: economics.handels.gu.se

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