Food safety, reputation and trade
AbstractI develop a simple dynamic model of reputation-based transactions between a buyer in one country and a supplier in another. I use the model to study the impact of a more stringent regulation on the buyer optimal purchase volume within an existing buyer-seller partnership. A more stringent standard affects the volume of trade in two intuitive ways: directly, a stricter standard affects the supply of quality goods and indirectly through reputation. I refer to the former effect as the regulation effect, and to the latter as the reputation effect. I show that, whereas most of the empirical literature has so far assumed that more stringent standards would be likely to reduce trade, the net effect is in fact non-monotone, even without taking into account endogenous technological upgrading in the supplier country. It varies with the belief the buyer holds about his seller at the time the change in regulation takes place. For both very low and very high seller's reputation, the reputation effect is negligible vis-à-vis the regulation effect. For intermediate levels of the supplier's reputation, reputation has the power to significantly mitigate the direct negative effect of a more stringent sanitary standard on trade. This result has significant implications for developing countries, for which access to developed countries markets is by and large, said to be disproportionately constrained by stricter standards.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Working Papers with number halshs-00586310.
Date of creation: Apr 2011
Date of revision:
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586310/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Product quality ; food safety ; reputation ; agricultural trade;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-04-23 (Agricultural Economics)
- NEP-ALL-2011-04-23 (All new papers)
- NEP-REG-2011-04-23 (Regulation)
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.:
- Luis Araujo & Emanuel Ornelas, 2007.
CEP Discussion Papers
dp0820, Centre for Economic Performance, LSE.
- Luis Araujo & Emanuel Ornelas, 2005. "Trust-Based Trade," IBMEC RJ Economics Discussion Papers 2005-08, Economics Research Group, IBMEC Business School - Rio de Janeiro.
- Luis Araujo & Emanuel Ornelas, 2007. "Trust-based trade," LSE Research Online Documents on Economics 19693, London School of Economics and Political Science, LSE Library.
- Olivier Cadot & Céline Carrère & Vanessa Strauss-Kahn, 2014.
"OECD imports: diversification of suppliers and quality search,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 150(1), pages 1-24, February.
- Cadot, Olivier & Carrere, Celine & Strauss-Kahn, Vanessa, 2011. "OECD imports : diversification of suppliers and quality search," Policy Research Working Paper Series 5627, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.