Export fraud, collective reputation, and barriers to domestic markets for eco-labeled agricultural products

Mireille Chiroleu-Assouline and Bilge Goktuna ()
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Bilge Goktuna: GSU - Galatasaray University

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Abstract: Many agricultural exporters of low or intermediate income countries meet demanding international eco-standards while their domestic market for the same goods stays thin, because home consumers judge quality through a collective reputation. We ask how fraud in the unlabeled export segment feeds back home. A "green" (G) and a "brown" (B) producer compete on prices at home and abroad; B misrepresents part of its exports, and border rejections-which consumers cannot attribute to either segment-lower a single reputation factor discounting the perceived quality of both products, which we microfound as a Bayesian posterior on the honesty of the national system. With detection escalating in the scale of fraud, equilibrium fraud is interior and socially excessive, since B internalizes neither the reputational externality on G and consumers nor the environmental damage of its exports. An intermediate national label insensitive to reputation need not help: by removing the green rival that disciplined B, a more ambitious label can paradoxically raise fraud, so the optimal national standard lies strictly below the international one. Border enforcement and label design are strategic substitutes: because consumers read observed rejections rather than actual fraud, sharper enforcement lowers the reputational floor, making it cheaper to expel the eco-label and forcing the regulator to retreat. The mechanism hinges on non-attributability-were rejections blamed on B alone, fraud would instead strengthen G. A calibration to the Turkish agri-food sector quantifies the effects.

Keywords: Collective reputation; Fraud; Vertical product differentiation; Eco-label; Environmental quality (search for similar items in EconPapers)
Date: 2026-10
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