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Uncovering the Sources of Cross-border Market Segmentation: Evidence from the EU and the US

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  • Hoste, J.
  • Verboven, F.

Abstract

We develop a new approach to measure the sources of cross-border goods market segmentation. Our cost-of-living approach uncovers the relative importance of price and product availability differences, while accounting for taste differences. We implement our methodology on regionally disaggregated consumer goods data in the EU and US. The analysis reveals that price, and especially, product availability differences are much larger between than within European countries, and are only marginally larger between than within US states. Our findings imply that US states are geographically integrated, whereas EU countries remain segmented, due to trade frictions that mainly relate to fixed costs.

Suggested Citation

  • Hoste, J. & Verboven, F., 2024. "Uncovering the Sources of Cross-border Market Segmentation: Evidence from the EU and the US," Janeway Institute Working Papers 2408, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camjip:2408
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    More about this item

    Keywords

    Geographic Market Integration; LOP Deviations; Product Availability Differences;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • F15 - International Economics - - Trade - - - Economic Integration
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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