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Tainted Food, Low-Quality Products and Trade

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  • Jean-Marie Viaene

    (Erasmus University Rotterdam, and CESifo)

  • Laixun Zhao

    (Kobe University)

Abstract

This paper examines international trade in tainted food and other low-quality products. Wefirst find that for a large class of environments, free trade is the trading system that conveysthe highest incentives to produce non-tainted high-quality goods by foreign exporters.However, free trade cannot prevent the export of tainted products, and the condition fortainting to arise becomes more easily satisfied, if the marginal cost of high-quality productionincreases or if errors of testing product quality matter. We also examine cases of imagebuildinginvestments and sabotage of rivals, and find that a tariff in either case reduces theforeign firm’s incentives to produce high quality, which in turn tends to increase importtainting.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-006/2.

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Date of creation: 04 Jan 2010
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Handle: RePEc:dgr:uvatin:20100006

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Web page: http://www.tinbergen.nl

Related research

Keywords: asymmetric information; experience good; product differentiation; sabotage; tainting; testing errors; trade;

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  1. Bergès-Sennou Fabian & Waterson Michael, 2005. "Private Label Products as Experience Goods," Journal of Agricultural & Food Industrial Organization, De Gruyter, De Gruyter, vol. 3(2), pages 1-19, December.
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