The market prices of gold products do not adequately internalize the costs associated with mitigating severe ecological damages and human rights violations in the gold mining supply chain. Consequently, both market and government failures emerged, pro...
The market prices of gold products do not adequately internalize the costs associated with mitigating severe ecological damages and human rights violations in the gold mining supply chain. Consequently, both market and government failures emerged, prompting diverse stakeholders to collaborate in addressing these challenges and promoting sustainable mining practices, an effort that culminated in the formation of the Alliance for Responsible Mining in 2004. In 2014, the Responsible Mining Initiative launched the Fairmined Gold certification system, designed to enhance supply chain transparency and mitigate associated ecological and social concerns. However, the fixed premium embedded within the system remains insufficient in capturing the full spectrum of externalities.
This study aims to examine the divergence between the premium pricing of Fairmined Gold and actual market demand, while proposing strategies to promote sustainability. In addition, it seeks to identify effective information dissemination approaches and key marketing segments that enhance consumers' willingness to purchase and pay, as well as to quantitatively assess shifts in purchasing behavior following information provision. To achieve these objectives, we employ the contingent valuation method from environmental economics to analyze the potential demand among domestic consumers, and we implement a random assignment procedure to accurately estimate the causal effect of the information treatment.
To assess the appropriateness of the Fairmined Gold premium price, an online survey experiment was conducted with 1,200 domestic adult men and women. Three groups were formed—a control group receiving minimal information, and two treatment groups receiving either ecological impact information or human rights impact information—and within each group, a total of 12 subgroups were organized based on four suggested premium amounts (KRW 2,800, KRW 5,600, KRW 11,200, and KRW 22,400), with 100 participants randomly assigned to each subgroup. Respondents were asked about their willingness to pay an additional premium for Fairmined Gold when purchasing a dol ring (a ring given on a child's first birthday), with their premium payment willingness elicited using a double-bounded dichotomous choice method. Furthermore, the study examined consumer attitudes toward the environment, political orientation, ethical consumption, long-term orientation, fair trade perceptions, and demographic factors to identify effective information dissemination strategies tailored to diverse consumer characteristics and to provide empirical insights for advancing sustainability.
The data analysis revealed that the type of information provided significantly increased both consumers' willingness to purchase and the premium they were willing to pay. Specifically, the inclusion of ecological impact information raised the purchase probability by 3.7 percentage points relative to the control group's 91.2% purchase intention. A heterogeneity analysis of purchase intention indicated that when the control group's purchase rate was 90% or higher, ecological impact information was more effective in promoting additional purchase intention than human rights impact information. Furthermore, consumers in the top 50% for long-term orientation demonstrated a significant increase in purchase intention in response to both ecological and human rights impact information. In monetary terms, the ecological impact information group exhibited a willingness to pay an additional minimum of KRW 7,671 above the control group's average willingness to pay of KRW 19,626, while the human rights impact information group was willing to pay an additional KRW 9,638 for Fairmined Gold. Notably, the control group's average willingness to pay of KRW 19,626 corresponds to 3.5 times the current Fairmined Gold certification premium of KRW 5,600; the ecological and human rights impact information groups correspond to 4.8 times and 5.2 times the current premium, respectively. These findings indicate that the current premium for Fairmined Gold does not adequately capture market demand.
An analysis of consumer characteristic variables on willingness to pay revealed that respondents with prior knowledge of Fairmined Gold were predicted to add an additional KRW 13,728, while each one-point increase in the Ethical Consumerism Index corresponded to an extra KRW 1,081. The heterogeneity analysis further indicated that individuals aged 43 and over demonstrated an increased willingness to pay of KRW 10,500—diverging from previous experimental surveys on fair trade products, which have predominantly noted heightened willingness among younger consumers, possibly due to younger individuals having less experience with gifting dol rings. Moreover, female respondents and those with children exhibited substantial increases in willingness to pay, ranging from KRW 9,500 to KRW 17,500, in response to ecological and human rights impact information. These results suggest that childbirth and parenting experiences may reinforce maternal affection and elevate the importance of ecological and human rights values, thereby influencing premium payment behavior.
The findings of this study substantiate the existence of latent demand for Fairmined Gold that emerges when consumers are provided with appropriate information. In particular, the results indicate that prior awareness of Fairmined Gold, along with exposure to ecological and human rights impact information, significantly influences the premium consumers are willing to pay. While previous research on Fair Trade product consumption and ethical consumption has largely focused on correlation analyses, the academic contribution of this study lies in its rigorous causal verification through random assignment, thereby revealing the potential demand for Fairmined Gold. Moreover, these findings offer practical management implications by delineating a pathway for advancing sustainability via the market expansion of Fairmined Gold.