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Tainted Food, Low-Quality Products and Trade

Author

Listed:
  • Jean-Marie Viaene

    (Erasmus University Rotterdam, and CESifo)

  • Laixun Zhao

    (Kobe University)

Abstract

This paper examines international trade in tainted food and other low-quality products. Wefirst find that for a large class of environments, free trade is the trading system that conveysthe highest incentives to produce non-tainted high-quality goods by foreign exporters.However, free trade cannot prevent the export of tainted products, and the condition fortainting to arise becomes more easily satisfied, if the marginal cost of high-quality productionincreases or if errors of testing product quality matter. We also examine cases of imagebuildinginvestments and sabotage of rivals, and find that a tariff in either case reduces theforeign firm’s incentives to produce high quality, which in turn tends to increase importtainting.

Suggested Citation

  • Jean-Marie Viaene & Laixun Zhao, 2010. "Tainted Food, Low-Quality Products and Trade," Tinbergen Institute Discussion Papers 10-006/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20100006
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    References listed on IDEAS

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    1. Roy, Santanu & Viaene, Jean-Marie, 1998. "On strategic vertical foreign investment," Journal of International Economics, Elsevier, vol. 46(2), pages 253-279, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    asymmetric information; experience good; product differentiation; sabotage; tainting; testing errors; trade;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - 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 Behavior

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