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Home Bias in U.S. Beer Consumption

  • Lopez, Rigoberto A.
  • Matschke, Xenia

We apply the Berry, Levinsohn and Pakes (1995) market equilibrium model (BLP) to data from 30 brands of beers sold in 12 U.S. cities over 20 quarters (1988-92) to estimate the consumersÂ’ 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, income and gender. 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 European beers and somewhat less so with respect to beers from bordering countries (Mexico and Canada). Home bias is more accentuated among older males who are more affluent. Furthermore, the own-price elasticities and the cross price elasticities of demand are higher for foreign beers, indicating a higher degree of loyalty and differentiation for domestic beers.

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Paper provided by European Association of Agricultural Economists in its series 105th Seminar, March 8-10, 2007, Bologna, Italy with number 7883.

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Date of creation: 2007
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Handle: RePEc:ags:eaa105:7883
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  1. 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.
  2. Donald R. Davis, 1997. "The home market, trade, and industrial structure," Staff Reports 35, Federal Reserve Bank of New York.
  3. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
  4. 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.
  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. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  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. Friberg, Richard & Paterson, Robert W. & Richardson, Andrew D., 2011. "Why is there a Home Bias? A Case Study of Wine," Journal of Wine Economics, Cambridge University Press, vol. 6(01), pages 37-66, January.
  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. 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.
  11. 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.
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