Social Preferences and Experimental Auctions for Ethical and Eco-labelled Food Thuriane Mah´ e and Laurent Muller Conference of the French Economic Association, Tutorial session – May 23, 2007 Abstract We design an experiment aimed at examining the role of social motives in socially respon- sible consumption. We restrict our study on non-durable goods such as food. We investigate the existence of a link between the willingness-to-pay for ethical and eco-labelled products and social preferences. Firstly, our experimental design focuses on measuring altruism, and more specifically the warm-glow giving behaviour. For this, we design a transfer game that combines a reduced dictator game and a social value orientation test, the ring test. Secondly, our experimental design uses experimental auctions to reveal willingness-to-pay for labelled food. 1 Introduction Fair-trade-labelled and eco-labelled food products represent admittedly niche markets, but these markets are growing in Europe and other countries. The arrival of eco-labelled and fair-trade-labelled products on the supermarket shelves can be seen as a recent phenomenon. For instance, fair-trade-labelled food is sold in mainstream grocery stores in France since 2002. Fair-trade labels, and sometimes organic labels as well, are considered as ‘ethical at- tributes’ or better, ‘socially responsible attributes’ (De Pelsmacker, Driesen, and Rayp 2005). Indeed, these attributes are related to ethical issues such as decent labor conditions, animal well-being and the environment that an individual consumer can freely choose to respect. Despite the increasing demand for socially responsible food, few studies examine the motives for socially responsible consumption experimentally. The existing literature regarding the premiums of consumers for ethical food relies heavily on stated preference measures elicited through hypothetical survey techniques, e.g. Loureiro and Lotade (2005) in the US, and De Pelsmacker, Driesen, and Rayp (2005) in Belgium. In addition, at least one field study reveals preferences for fair-trade food. This study on coffee in Canada is by Arnot, Boxall, and Cash (2006). A common point to all the cited studies is that consumption motives are only derived from questionnaires. Nevertheless, consumers’ motives cannot be fully apprehended through questionnaires. Especially motives for socially responsible consumption that remain puzzling. It is generally admitted that consumers’ buying behaviour is inconsistent with their stated attitude toward organic and fair-trade-labelled products. This puzzle partly comes from the mixed motives of consumers. Self-oriented and other-regarding motives are actually intertwined (Bougherara and Combris 2005) in socially responsible purchase behaviour, and so far, questionnaires have not completely succeeded in disentangling the influences of each of these motives. Another approach would consist in focusing only on other-regarding motives. One can observe social preferences before trying to reveal consumption preferences. This is a way to question the role of other-regarding motives in consumption behaviour, and it is precisely the objective of our experimental design. 1