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When Government Misleads US: Sending Misinformation as Protectionist Devices

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  • Keisuke Hattori

    (Faculty of Economics, Osaka University of Economics)

  • Keisaku Higashida

    ()
    (School of Economics, Kwansei Gakuin University)

Abstract

In this paper, we examine the incentive of the home government to mislead home consumers by sending misinformation. We nd that positive misinformation on home products and negative misinformation on foreign products always increases the pro t of the home rm, while when the marginal costs of home and foreign rms are the same, a small amount of positive misinformation decreases the consumer surplus. Moreover, when the home government maximizes home welfare, it chooses to send positive misinformation on the home product and negative misinformation on the foreign product. The stronger is the competition faced by the home rm, the greater is the amount of negative misinformation on the foreign product. By contrast, the optimal amount of misinformation on each product used to maximize world welfare is positive. We also demonstrate that trade liberalization can increases the incentive of the home government to send misinformation.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp75.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 75.

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Length: 27 pages
Date of creation: Aug 2011
Date of revision: Aug 2011
Handle: RePEc:kgu:wpaper:75

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Related research

Keywords: Strategic misleading; misinformation; non-tari trade policies;

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  1. Glaeser, Edward L. & Ujhelyi, Gergely, 2010. "Regulating misinformation," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 247-257, April.
  2. Keisuke Hattori & Keisaku Higashida, 2011. "Misleading Advertising in Duopoly," Discussion Paper Series 69, School of Economics, Kwansei Gakuin University, revised Mar 2011.
  3. Qiu, Larry D, 1995. "Strategic Trade Policy under Uncertainty," Review of International Economics, Wiley Blackwell, vol. 3(1), pages 75-85, February.
  4. Melkonian, Tigran A. & Lapan, Harvey E., 2005. "Tariffs, Quotas and Forward Contracts Under Asymmetric Information," Staff General Research Papers 10288, Iowa State University, Department of Economics.
  5. Qui, Larry D., 1994. "Optimal strategic trade policy under asymmetric information," Journal of International Economics, Elsevier, vol. 36(3-4), pages 333-354, May.
  6. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
  7. Taiji Furusawa & Keisaku Higashida & Jota Ishikawa, 2004. "Tariffs versus quotas in the presence of imperfect competition and cross-border externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 445-458, May.
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