“…We assume that domestic firms produce the high-quality good ( H k ) and foreign firms produce products of lower quality ( L k ) or are at least perceived as such. Consistent with previous models of labeling (e.g., Bureau, Marette and Schiavina, 1998;Giannakas and Fulton, 2002;Fulton and Giannakas, 2004;Zago and Pick, 2004;Plastina, Giannakas, and Pick, 2011, Saak, 2011, Awada and Yiannaka, 2012, we assume that quality is fixed and exogenous. Furthermore, it is the quality perceived by consumers that is represented by k in our model.…”