Infant-industry protection reconsidered: The case of informational barriers to entry

Gene M. Grossman, Henrik Horn

Research output: Contribution to journalArticlepeer-review

70 Scopus citations


In industries with imperfect consumer information, the lack of a reputation puts latecomers at a competitive disadvantage vis-à-vis established firms. We consider whether the existence of such informational barriers to entry provides a valid reason for temporarily protecting infant producers of experience goods and services. Our model incorporates both moral hazard in an individual firm's choice of quality and adverse selection among potential entrants into the industry. We find that infant-industry protection often exacerbates the welfare loss associated with these market imperfections.

Original languageEnglish (US)
Pages (from-to)767-787
Number of pages21
JournalQuarterly Journal of Economics
Issue number4
StatePublished - Nov 1 1988
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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