Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86703
Authors: 
Viaene, Jean-Marie
Zhao, Laixun
Year of Publication: 
2010
Series/Report no.: 
Tinbergen Institute Discussion Paper 10-006/2
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.
Subjects: 
asymmetric information
experience good
product differentiation
sabotage
tainting
testing errors
trade
JEL: 
D43
F12
F13
I12
Document Type: 
Working Paper

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