Fair Trade Contracts for Some, an Insurance for Others

Claire Chambolle (1, 2) , Sylvaine Poret (1, 2)

1 X-DEP-ECO - Département d'Économie de l'École Polytechnique
2 ALISS - Alimentation et sciences sociales

This article analyzes the impact of Fair Trade contracts between sub-groups of farmers and a Fair Trade organization on the spot market price. We analyze a three level vertical chain gathering perfectly competitive farmers upstream who offer their raw product on a spot market to manufacturers who then sell finished products to a downstream retailer. Absent Fair Trade, the entire raw product is sold on the spot market. When a Fair Trade organization offers a Fair Trade contract to a sub-group of farmers, it gathers a Guaranteed Minimum Price clause and a straight relationship between the sub-group of farmers and the retailer. This article highlights several conditions such that a snowball effect exists, i.e farmers outside of the Fair Trade contract also benefit from a higher spot market price.

Mots clés: Guaranteed Minimum Price Contracts; Disintermediation; Fair Trade; Vertical Chain; Two-part Tariff Contracts

Domaines: Economies et finances

Claire Chambolle, Sylvaine Poret. Fair Trade Contracts for Some, an Insurance for Others. 2009. ⟨hal-00367500⟩