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Uncovering the Sources of Geographic Market Segmentation: Evidence from the EU and the US

Author

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  • Hoste, Joris
  • Verboven, Frank

Abstract

We develop a new approach to measure the sources of geographic 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, Joris & Verboven, Frank, 2024. "Uncovering the Sources of Geographic Market Segmentation: Evidence from the EU and the US," CEPR Discussion Papers 18911, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18911
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    2. Richard Friberg & Frode Steen & Simen A. Ulsaker, 2025. "Cross‐Border Shopping of Alcohol—What is the Effect on Tax Revenue and Sales and Which Products Are Most Affected?," Review of International Economics, Wiley Blackwell, vol. 33(5), pages 1021-1034, November.

    More about this item

    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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