Exporting as a Signal for Product Quality

12 Pages Posted: 30 Dec 2003

See all articles by Oz Shy

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Abstract

I develop a dynamic asymmetric information model where a domestic producer is unable to commit to producing a high-quality product. The domestic producer then can signal to consumers that it is producing a high-quality product by developing the infrastructure needed to start exporting the product. This signalling may take place even if selling internationally is less profitable than selling high quality only at home in the absence of credibility problems. Thus, this paper provides another explanation for the decision to start exporting. I then analyse how and which kind of export subsidies alter a firm's incentive to sell a high-quality product in different markets.

Suggested Citation

Shy, Oz, Exporting as a Signal for Product Quality. Economica, Vol. 67, pp. 79-90, February 2000. Available at SSRN: https://ssrn.com/abstract=439194

Oz Shy (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

HOME PAGE: http://https://www.frbatlanta.org/research/economists/shy-oz.aspx

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