ORIGINAL PAPER The Importance of the Indirect Transfer Mechanism for Consumer Willingness to Pay for Fair Trade Products—Evidence from a Natural Field Experiment Hannes Koppel & Günther G. Schulze Received: 15 November 2012 / Accepted: 9 July 2013 / Published online: 3 August 2013 # Springer Science+Business Media New York 2013 Abstract A natural field experiment is conducted on the determinants of consumer ’ s willingness to pay for “fair trade” (FT) products. In four treatments, subjects are offered different choices in connection with a coffee purchase, such as buying regular coffee or FT coffee at a premium, regular coffee with or without a premium, or donating directly or not donating. Depending on the treatment, the premium or direct donations are either given to FT or a well-known charity. A large part of the willingness to pay a premium for FT coffee over regular coffee is shown to be not related to the specific attributes of FT coffee but rather caused by the indirect transfer mechanism that FT uses, i.e., selling products at a premium which goes to the cause of FT. Keywords Fair Trade . Donation . Altruism . Transfer Mechanism Introduction The fair trade (FT) model offers an alternative to traditional trade channels intending to support participating producers in the global South. Consumers in the North are willing to pay a price premium over a non-FT product of otherwise equal quality. The premium is used to pay farmers and workers better prices and wages, respectively, to guarantee stable trade relations and to finance communal funds for social, environmental, and economic projects. To participate in FT, the production of an entire plantation has to fulfil the FT standards. However, considering a sales quota, producers can sell only some of their goods through the FT channel while the rest has to be sold at world market prices (cf. Steinrücken and Jaenichen 2007). This quota guarantees that non-FT products of otherwise equal quality J Consum Policy (2013) 36:369–387 DOI 10.1007/s10603-013-9234-0 H. Koppel (*) Alfred-Weber-Institute, University of Heidelberg, Bergheimer Strasse 58, 69115 Heidelberg, Germany e-mail: hannes.koppel@awi.uni-heidelberg.de G. G. Schulze Department of Economics, Albert-Ludwigs-University Freiburg, Paltz der Alten Synagoge 1, 79085 Freiburg, Germany e-mail: guenther.schulze@vwl.uni-freiburg.de