Tainted Food, Low-Quality Products and Trade
AbstractThis paper examines international trade in tainted food and other low-quality products. We first find that for a large class of environments, free trade is the trading system that conveys the highest incentives to produce non-tainted high-quality goods by foreign exporters. However, free trade is neither a necessary nor a sufficient condition to exclude trade in tainted products. This condition is less easily satisfied if the marginal cost of high-quality production increases, or if errors of testing product quality matter. We also examine cases of image-building investments and sabotage. In particular, sabotage by the domestic firm reduces the foreign firm's incentives to produce high quality, and as a consequence tends to increase import tainting.
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Bibliographic InfoPaper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 245.
Length: 37 pages
Date of creation: Oct 2009
Date of revision:
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Asymmetric information; Experience good; Product differentiation; Sabotage; Tainting; 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; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- I12 - Health, Education, and Welfare - - Health - - - Health Production
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- 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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