Who Wins from Fairtrade: Evidence from the Retail Cofee Market
Concerns for health, the environment and fair working conditions appear to be spurring the appearance of goods that address these concerns. These goods distinguish themselves from their "conventional" counterparts in several respects including for example the process and production methods employed and are supposed to be healthier, cleaner, tastier, or fairer. In many instances, the characteristics that differentiate these products may not be easily identified by consumers. These are credence goods (Darby and Karni 1973) where the quality cannot easily be assessed before or after consumption.
One of the approaches that have been adopted to address this information asymmetry are a system of voluntary labelling initiatives 1. Producers signal that their good has been produced in accordance with some voluntary standard by placing an ecolabel on the package. The label is often used as a simple way to present complex information to consumers with a recognised and trusted symbol. These standards are voluntary in that they operate within the space provided by mandatory product standards.