Location Choice as a Signal for Product Quality: The Economics of 'Made in Germany'
AbstractIn the literature on international marketing it is generally agreed upon that the location of production has considerable effects on consumers' beliefs about product quality. In this paper, a rational choice explanation for this fact is offered. Due to differences in country-specific costs (such a high wages and taxes) and coutnry exit costs (such as compulsory social plans), location choice can act as a signaling device for product quality in the sense that high country-specific costs signal high product quality. The 'Made-in' label may be especially relevant as a signal if sinking resources before entering the market is not posible due to capital market constraints. Furthermore, potential implications for geographic labeling laws are explored.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 153 (1997)
Issue (Month): 3 (September)
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Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- K20 - Law and Economics - - Regulation and Business Law - - - General
- M30 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - General
- R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
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