Tainted Food, Low-Quality Products and Trade

Jean-Marie Viaene and Laixun Zhao
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Jean-Marie Viaene: Erasmus University Rotterdam, and CESifo

No 10-006/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

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.

Keywords: asymmetric information; experience good; product differentiation; sabotage; tainting; testing errors; trade (search for similar items in EconPapers)
JEL-codes: D43 F12 F13 I12 (search for similar items in EconPapers)
Date: 2010-01-04
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https://papers.tinbergen.nl/10006.pdf (application/pdf)

Related works:
Working Paper: Tainted Food, Low-Quality Products and Trade (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20100006

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