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When Government Misleads US: Sending Misinformation as Protectionist Devices

Author

Listed:
  • 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.

Suggested Citation

  • Keisuke Hattori & Keisaku Higashida, 2011. "When Government Misleads US: Sending Misinformation as Protectionist Devices," Discussion Paper Series 75, School of Economics, Kwansei Gakuin University, revised Aug 2011.
  • Handle: RePEc:kgu:wpaper:75
    as

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    File URL: http://192.218.163.163/RePEc/pdf/kgdp75.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
    1. Keisuke Hattori & Keisaku Higashida, 2012. "Misleading advertising in duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 1154-1187, August.
    2. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
    3. Glaeser, Edward L. & Ujhelyi, Gergely, 2010. "Regulating misinformation," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 247-257, April.
    4. Qui, Larry D., 1994. "Optimal strategic trade policy under asymmetric information," Journal of International Economics, Elsevier, vol. 36(3-4), pages 333-354, May.
    5. 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.
    6. Qiu, Larry D, 1995. "Strategic Trade Policy under Uncertainty," Review of International Economics, Wiley Blackwell, vol. 3(1), pages 75-85, February.
    7. Tigran Melkonyan & Harvey Lapan, 2005. "Tariffs, Quotas, and Forward Contracts under Asymmetric Information," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 311-329, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Strategic misleading; misinformation; non-tari trade policies;

    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

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