When Government Misleads US: Sending Misinformation as Protectionist Devices
AbstractIn 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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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 75.
Length: 27 pages
Date of creation: Aug 2011
Date of revision: Aug 2011
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More information through EDIRC
Strategic misleading; misinformation; non-tari trade policies;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-29 (All new papers)
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