Credence goods, consumers’ trust in regulation and high quality exports

We analyze the impact of the effectiveness of internal regulation for the development of internal and export markets for credence goods, focusing on food products, particularly for a developing country which is an exporter (or a potential exporter). In the model, since goods of actual different quality can be sold as high quality goods, expected quality is a function of consumers’ beliefs about the effectiveness of regulation. Foreign consumers, who cannot observe foreign regulation as closely as domestic ones, may partly base their expectations on the level of development of the exporting country. Low effectiveness, negative stereotype and low consumers’ trust may cause a failure in the market for high quality, and there may be a trap of underdevelopment and no high quality exports. The main policy implications are that increasing the effectiveness of regulation improves export prospects; standard setting and enforcement by external actors, such as supermarkets, or NGOs in the case of certain niche markets, is likely to be beneficial.


Issue Date:
2015-08
Publication Type:
Journal Article
DOI and Other Identifiers:
DOI: 10.13128/BAE-14511 (Other)
ISSN 2280-6180 (print) (Other)
ISSN 2280-6172 (online) (Other)
Record Identifier:
http://ageconsearch.umn.edu/record/210029
PURL Identifier:
http://purl.umn.edu/210029
Published in:
Bio-based and Applied Economics Journal, Volume 04, Issue 2
Page range:
179-197
Total Pages:
19
JEL Codes:
L15; F13; O12




 Record created 2017-04-01, last modified 2018-01-23

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