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Contagious "Social Market Enterprises": The Role of Fair Traders

Leonardo Becchetti

- Giuseppina Gianfreda*

'Tor Vergata' University, Rome

 

University of Tuscia, Viterbo
     


One of the effects of the introduction of fair trade goods is that of triggering socially responsible imitation of profit maximising
sellers and distributors, thereby creating a consumer driven market mechanism which promotes equity and inclusion. To proof ourclaim we analyze the effects of a fair trader’s entry in a differentiation model where the profit maximizing incumbent mayreact in prices and social responsibility and its position on the segment of social responsibility needs to be advertised at some cost. We outline complementarity and substitution effects among relevant variables and explore incumbent’s incentives to cheat on his ethical stance. [JEL Classification: L11, L31]


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* Becchetti@economia.uniroma2.it - Faculty of Economics
* ggianfreda@unitus.it - Faculty of Political Science

The Authors thank F. Adriani, S. Anderson, M. Bagella, K. Basu, R. Cellini, L. Debenedictis, M. Fenoaltea, B. Frey, P. Garella, I. Hasan, L. Lambertini, S. Martin, N. Phelps, G. Piga and P. Scaramozzino, M.E. Tessitore, P. Wachtel, C. Whilborg and all participants to the 1st ECINEQ Conference held in Palma de Majorca and to seminars held at the XV Villa Mondragone Conference, at SOAS in London, at the Copenhagen Business School and the Universities of Catania, Bologna, Macerata, Milano Bicocca, Trento and Verona for the useful comments and suggestions received. The usual disclaimer applies.
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