Quality Signaling and International Trade in Food Products
AbstractFocusing on the issue of food safety, the authors consider a framework of repeated purchases under the scenario of imperfect information on product quality (adverse selection and experience goods). A firm in a northern country can more easily detect tainted products than can a southern one. When imports are banned, the northern firm does not always signal the actual quality of its products. Competition from imports may lead the northern firm to test the quality of its products as a way to differentiate itself from foreign competitors. Consumers benefit from the disclosure of information on quality, even though borders are open to products of uncertain quality. However, competition from imports also increases the cost of signaling high quality. This can be detrimental to the welfare of the importing country when the cost of detection is high.
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Bibliographic InfoPaper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 01-wp283.
Date of creation: Aug 2001
Date of revision:
Other versions of this item:
- J.-C. Bureau & E. Gozlan & S. Marette, 1999. "Quality signaling and international trade in food products," THEMA Working Papers 99-13, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Bureau, J.-C. & Gozlan, E. & Marette, S., 1999. "Quality Signaling and International Trade in Food Products," Papers 99-13, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
- Jean-Christophe Bureau & Estelle Gozlan & StÃ©phan Marette, 2001. "Quality Signaling and International Trade in Food Products," Center for Agricultural and Rural Development (CARD) Publications 01-wp283, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
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