Why is There a Home Bias? A Case Study of Wine

39 Pages Posted: 19 Jul 2010

See all articles by Richard Friberg

Richard Friberg

Stockholm School of Economics - Department of Economics

Robert W. Paterson

Industrial Economics, Inc.

Andrew Richardson

affiliation not provided to SSRN

Date Written: June 2010

Abstract

Domestic products have a disproportionately high market share on many goods markets. We examine the contribution of preferences to such "home bias", using detailed data on wine sales in New Hampshire (weekly sales by brand by store for one year). In counterfactual simulations, where we use the same set of products as currently available, the U.S. market share falls from 58 percent to 38 percent if all country-of-origin effects are set equal. Home bias on this market is not explained by higher marginal costs for imports or by lesser store coverage of imported brands. The evidence rather points to higher foreign fixed costs of entry, coupled with a preference for U.S. wines, as the main sources for the high domestic market share.

Keywords: border effects, Home bias, trade barriers

JEL Classification: F12, F14, L13, L66

Suggested Citation

Friberg, Richard and Paterson, Robert W. and Richardson, Andrew, Why is There a Home Bias? A Case Study of Wine (June 2010). CEPR Discussion Paper No. DP7885. Available at SSRN: https://ssrn.com/abstract=1640407

Richard Friberg (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9645 (Phone)
+46 8 720 7752 (Fax)

Robert W. Paterson

Industrial Economics, Inc. ( email )

2067 Massachusetts Avenue
Cambridge, MA 02140-1337
United States

HOME PAGE: http://www.indecon.com/iec_Web/mainmenu/keystaff.asp

Andrew Richardson

affiliation not provided to SSRN ( email )

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