International Trade in 'Quality Goods': Signalling Problems for Developing Countries

Consumers evaluate product quality with information signals such as brand name giving an advantage to established firms over other firms even when introducing a new product. Another signal is "country of origin" and, as high-income countries focus more heavily on higher quality goods, there is a tendency for consumers to associate quality with a country's income per capita. Thus new firms from developing countries face particular problems in export markets. International standardization offers a potential solution to their problem. However, analysis of the use of ISO 9000 suggests that it is difficult to eliminate the informational asymmetry.