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Home Bias in U.S. Beer Consumption

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  • Rigoberto A. Lopez

    ()
    (University of Connecticut)

  • Xenia Matschke

    ()
    (University of Trier)

Abstract

We apply the Berry, Levinsohn, and Pakes (1995) market equilibrium model to data from 30 brands of beers sold in 12 U.S. cities over 20 quarters (1988-92) to estimate the consumers’ taste for beer characteristics (price, alcohol content, and calories) as well as for the cultural region of origin (USA, Anglo-European, Germanic, and countries bordering the U.S.). Consumer heterogeneity is allowed with respect to age and income. Overall we end up with 7,200 beer brand observations (30x12x20) and 13,920 (58 random draws x 12 x 20) consumer observations. Empirical results indicate that indeed there is home bias with respect to foreign beers. Home bias is less accentuated among older and more affluent individuals.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Working Papers with number 04.

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Length: 15 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:zwi:wpaper:04

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Keywords: Home bias; beer; country of origin; demand; differentiated products;

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References

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  1. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  2. Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2013. "A Structural Approach to Identifying the Sources of Local Currency Price Stability," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 175-210.
  3. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  4. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA.
  5. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
  6. Donald R. Davis, 1997. "The Home Market, Trade and Industrial Structure," Harvard Institute of Economic Research Working Papers 1800, Harvard - Institute of Economic Research.
  7. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  8. Russell Hillberry & David Hummels, 2002. "Explaining Home Bias in Consumption: The Role of Intermediate Input Trade," NBER Working Papers 9020, National Bureau of Economic Research, Inc.
  9. Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
  10. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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