Markets with untraceable goods of unknown quality: a market failure exacerbated by globalization
Timothy McQuade,
Stephen W. Salant and
Jason Winfree
MPRA Paper from University Library of Munich, Germany
Abstract:
In markets for many fruits, vegetables, and an increasing number of imported goods, consumers cannot discern the quality of a product prior to purchase and can never identify its producer. Producing high-quality, safe goods is costly for a firm and raises the collective reputation for quality shared with its rivals. Minimum quality standards improve welfare. If consumers observe the country of origin of a product, quality, profits, and welfare increase. Exports from countries with more exporting firms are of lower quality and sell for lower prices. If one country imposes a minimum quality standard on its exports while other countries do not, consumers benefit. As for sellers, the regulation raises the profits of firms in the country with regulation and lowers the profits of firms in countries without regulation.
Keywords: globalization; quality; collective reputation; minimum quality standards (search for similar items in EconPapers)
JEL-codes: D43 L13 L15 (search for similar items in EconPapers)
Date: 2009-12-14
New Economics Papers: this item is included in nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/21874/1/MPRA_paper_21874.pdf original version (application/pdf)
Related works:
Working Paper: Markets with Untraceable Goods of Unknown Quality: A Market Failure Exacerbated by Globalization (2010) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:21874
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().