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Home bias in multimarket Cournot games

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  • Roux, Catherine
  • Santos-Pinto, Luís
  • Thöni, Christian

Abstract

We explore the role of trade costs for the home bias in trade. In a series of Cournot duopoly experiments with a home and an export market, we compare output choices when firms face different levels of trade costs. We find that there is two-way trade in identical products and that firms hold the majority market share in their home market. The resulting home bias turns out to be, however, stronger than that predicted by theory, and it even occurs without trade costs. Tacit collusion contributes to the home bias observed in our experiment but does not offer a full explanation for the phenomenon.

Suggested Citation

  • Roux, Catherine & Santos-Pinto, Luís & Thöni, Christian, 2016. "Home bias in multimarket Cournot games," European Economic Review, Elsevier, vol. 89(C), pages 361-371.
  • Handle: RePEc:eee:eecrev:v:89:y:2016:i:c:p:361-371
    DOI: 10.1016/j.euroecorev.2016.08.007
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    Cited by:

    1. Herz, Benedikt & Varela-Irimia, Xosé-Luís, 2016. "Border Effects in European Public Procurement," MPRA Paper 76401, University Library of Munich, Germany, revised 24 Jan 2017.

    More about this item

    Keywords

    Intra-industry trade; Spatial oligopoly; Home bias; Collusion; Experiment;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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