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The willingness of consumers to pay more for a fair-trade or organic product

Fair-trade products have developed considerably during the past twenty years. The World Trade Organisation (WTO) has acknowledged the important role of the labelling of these products during trade negotiations. INRA scientists carried out a study on consumers concerning their willingness to pay a higher price for seafood products bearing these labels.

Crevettes cuites. © CAIN Anne-Hélène

During the past ten years, the consumption of prawns has seen considerable growth (2636 tonnes in 1990 versus 6529 tonnes in 2007). But this rise has been accompanied by a cost from the health point of view.  Indeed, prawns carry numerous bacteria (e.g. salmonella) that require the use of pesticides and antibiotics during their production. To this cost should be added problems linked to environmental damage, with 80% of production being concentrated in Asia (destruction of mangroves, exhaustion of rivers) and poor working conditions for the labour force.  In the face of these negative elements, organic labels have also developed for these products, but still remain highly marginal (less than 1% of world production).
The research team measured the impact on consumer choice of information on the environmental and social characteristics of these products. This experiment, performed in Paris in 2009, involved a sample of 160 people aged between 18 and 85 years and selected using a quota method as being representative of the age groups and occupational statuses of the Parisian population.
The experiment concerned farmed prawns that had been shelled, cooked, refrigerated and packaged in 100 g plastic sachets (the format most widely consumed in France in 2008). A distinction was made between so-called "conventional" prawns and those produced in compliance with certain environmental and social standards.
Before the experiment, the participants were tested regarding their susceptibility to information. Although they attached considerable importance to environmental protection and workers' rights, they did not feel that they were well informed about the safety of products.  They expressed a degree of confidence in organic and/or fair trade products. The experiment itself was then performed in several stages so as to determine variations in consumers' willingness to pay as new information was gradually divulged.
The results showed that only precise information had a real effect on consumer willingness to pay. Furthermore, environmental and social labels exerted a positive influence on this willingness to pay. The degree of this influence was similar for the two types of label.  However, consumers were not receptive to an accumulation of different labels.
Improvements to the quality of agricultural products, indicated by the granting of a label, thus appear to constitute a means to increase the incomes of producers in developing countries.  Nevertheless, the results of this experiment also underlined problems linked to the development and description of new product attributes, once a label already has a well-established reputation in the market. Producers in developing countries would therefore find it useful to adopt a cautious approach to choosing which label to place on their products in order to benefit from this additional willingness to pay of consumers.