Tainted Food, Low-Quality Products and Trade
AbstractThis 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 InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-006/2.
Date of creation: 04 Jan 2010
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asymmetric information; experience good; product differentiation; sabotage; tainting; testing errors; trade;
Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- I12 - Health, Education, and Welfare - - Health - - - Health Production
This paper has been announced in the following NEP Reports:
- NEP-AGR-2010-05-15 (Agricultural Economics)
- NEP-ALL-2010-05-15 (All new papers)
- NEP-CTA-2010-05-15 (Contract Theory & Applications)
- NEP-INT-2010-05-15 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bergès-Sennou Fabian & Waterson Michael, 2005.
"Private Label Products as Experience Goods,"
Journal of Agricultural & Food Industrial Organization,
De Gruyter, vol. 3(2), pages 1-19, December.
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