Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2010-01-04
Number: 10-006/2
Author-Name: Jean-Marie Viaene
Author-Workplace-Name: Erasmus University Rotterdam, and CESifo
Author-Name: Laixun Zhao
Author-Workplace-Name: Kobe University
Title: Tainted Food, Low-Quality Products and Trade
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.
Classification-JEL: D43, F12, F13, I12
Keywords: asymmetric information, experience good, product differentiation, sabotage, tainting, testing errors, trade
File-Url: https://papers.tinbergen.nl/10006.pdf
File-Format: application/pdf
File-Size: 228739 bytes
Handle: RePEc:tin:wpaper:20100006