One of the questions that has come out of the recent product quality related scares and recalls in China is exactly how much people are willing to pay for quality. After all, there is a tradeoff between quality and price — higher quality is generally more expensive to produce. But how much quality are people willing to sacrifice for lower prices?

In Japan at least it seems that willingness to pay for quality of food is very high. This article describes how sales of imported matsutake mushrooms from China have fallen in Japan by more than 50 percent this year, despite no evidence that their quality is poor, and despite domestically grown mushrooms selling for five to ten times the price of imported ones. Incidents like this suggest that Chinese producers may have underestimated people’s desire for quality, particularly in rich countries. In the end, everything should work out more or less ok, as Chinese producers will rationally respond to the reduction in demand that they are now experiencing by increasing the quality of the goods that they produce.