 Inspection, testing errors and trade in tainted productsJean-Marie Viaene and Laixun Zhao Journal of the Japanese and International Economies, 2015, vol. 35, issue C, 99-116 Abstract: This paper examines international trade and inspection involving tainted products in a model of quality choice, facing fears that globalization is the cause of numerous food incidents. Particularly, we ask the following questions: (i) What are the conditions under which foreign firms choose to produce tainted goods? (ii) Does globalization via freer trade lower product safety? (iii) Why are goods imported even though they are known to be harmful? We show the existence of a free trade Nash equilibrium characterized by production and trade of high-quality non-tainted products. However, free trade cannot prevent the export of tainted goods, because the foreign firm may deviate under different combinations of parameters. We identify self-correcting mechanisms such as nationalism and a political-economy re-allocation of public resources in favor of customs authorities. Nevertheless, we also uncover activities that exacerbate tainted production like errors of testing and sabotage by rival firms. Keywords: Tainting; Errors of testing; Experience good; Asymmetric information; Sabotage; Self correction (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:35:y:2015:i:c:p:99-116 DOI: 10.1016/j.jjie.2014.11.001 Access Statistics for this article Journal of the Japanese and International Economies is currently edited by Takeo Hoshi More articles in Journal of the Japanese and International Economies from Elsevier |
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