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Unpublished Paper
When Government Misleads US: Sending Misinformation as Protectionist Devices
Kwansei Gakuin University Discussion Paper Series (2011)
  • Keisuke Hattori
  • Keisaku Higashida
Abstract
In this paper, we examine the incentive of the home government to mislead home consumers by sending misinformation. We find that positive misinformation on home products and negative misinformation on foreign products always increases the profit of the home firm, while when the marginal costs of home and foreign firms are the same, a small amount of positive misinformation decreases the consumer surplus. Moreover, when the home government maximizes home welfare, it chooses to send positive misinformation on the home product and negative misinformation on the foreign product. The stronger is the competition faced by the home firm, the greater is the amount of negative misinformation on the foreign product. By contrast, the optimal amount of misinformation on each product used to maximize world welfare is positive. We also demonstrate that trade liberalization can increases the incentive of the home government to send misinformation.
Keywords
  • Strategic misleading,
  • misinformation,
  • non-tariff trade policies.
Publication Date
August, 2011
Citation Information
Keisuke Hattori and Keisaku Higashida. "When Government Misleads US: Sending Misinformation as Protectionist Devices" Kwansei Gakuin University Discussion Paper Series (2011)
Available at: http://works.bepress.com/hattori/12/