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Why is there a home bias? A case study of Wine

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  • Friberg, Richard
  • Paterson, Robert W
  • Richardson, Andrew D

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.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7885.

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Date of creation: Jun 2010
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Handle: RePEc:cpr:ceprdp:7885

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Related research

Keywords: border effects; Home bias; trade barriers;

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Cited by:
  1. Massimiliano Bratti & Giulia Felice, 2011. "Are Exporters More Likely to Introduce Product Innovations?," Development Working Papers 306, Centro Studi Luca d\'Agliano, University of Milano, revised 09 May 2011.
  2. Francesco DI COMITE & Jacques-François THISSE & Hylke VANDENBUSSCHE, 2011. "Verti-zontal Differentiation in Monopolistic Competition," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011046, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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