The effects of values and information on the willingness to pay for sustainability credence attributes for coffee

Abstract

AbstractThis research estimates consumers’ willingness to pay (WTP) for coffee labeled for sustainability credence attributes using non‐hypothetical experimental auctions. We examined consumers’ WTP for Fair Trade, USDA Organic, Rainforest Alliance, Direct Trade, and a combination of Fair Trade and USDA Organic labels on coffee. Additionally, we investigated the underlying motivations of WTP for sustainable coffee. Specifically, we focused on altruistic, egoistic, and biospheric value orientation, and the warm glow effect. Our results indicate that consumers are willing to pay a premium of $2.57 for a 12oz coffee bag labeled for both, Fair Trade and USDA Organic, $2.04 for USDA Organic, $1.79 for Fair Trade, $1.96 for Rainforest Alliance, and $1.71 for Direct Trade. We also find that consumers react positively to information about the labels’ claims, increasing the premium by approximately 55% for Rainforest Alliance coffee and 72% for Fair Trade coffee. Although some consumers exclusively pursue their self‐interest and do not care about social goals “per se”, this does not hold for everyone. Our study demonstrates that the warm glow effect on consumers that like coffee influences bids for coffee that carries sustainability labels.