What Drives Home Market Advantage?

52 Pages Posted: 26 Jul 2016

See all articles by Kerem Cosar

Kerem Cosar

Stockholm School of Economics - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); Bogazici University - Center for Economics and Econometrics

Paul L.E. Grieco

Pennsylvania State University - Department of Economics

Shengyu Li

Durham University

Felix Tintelnot

University of Chicago Department of Economics

Multiple version iconThere are 4 versions of this paper

Date Written: July 19, 2016

Abstract

In the automobile industry, as in many tradable goods markets, firms usually earn their highest market share within their domestic market. The goal of this paper is to disentangle the supply- and demand-driven sources of the home market advantage. While trade costs, foreign production costs, and taste heterogeneity all matter for market outcomes, we find that a preference for home brands is the single most important driver of home market advantage - even after controlling for brand histories and dealer networks. Furthermore, we also find that consumers favor domestically producing brands regardless of the historical brand origin.

Suggested Citation

Cosar, A. Kerem and Grieco, Paul L.E. and Li, Shengyu and Tintelnot, Felix, What Drives Home Market Advantage? (July 19, 2016). Becker Friedman Institute for Research in Economics Working Paper No. 2016-19. Available at SSRN: https://ssrn.com/abstract=2814687 or http://dx.doi.org/10.2139/ssrn.2814687

A. Kerem Cosar (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Bogazici University - Center for Economics and Econometrics ( email )

Bogazici Universitesi
Bebek
Istanbul, 34342
Turkey

Paul L.E. Grieco

Pennsylvania State University - Department of Economics ( email )

University Park
State College, PA 16802
United States

Shengyu Li

Durham University ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Felix Tintelnot

University of Chicago Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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