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Tainted Food, Low-Quality Products and Trade

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  • Jean Marie Viaene

    (Erasmus University Rotterdam, Tinbergen Institute (Netherlands) and CESifo)

  • Laixun Zhao

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This 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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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp245.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 245.

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Length: 37 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:kob:dpaper:245

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Related research

Keywords: Asymmetric information; Experience good; Product differentiation; Sabotage; Tainting; Trade;

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  1. Berg├Ęs-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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