IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-14-00467.html
   My bibliography  Save this article

The myth of the domestic brand bias for automobiles in the european union

Author

Listed:
  • Vlad Radoias

    (Towson University)

Abstract

The domestic brand bias has been one of the most commonly used explanations for automobiles price differences across international borders in the EU. Using a panel dataset comprising of 51 models across 21 EU member states, we take advantage of cross country heterogeneity, and find that, controlling for income aspects, the domestic brand bias does not work in the way it was originally thought of. Instead, we find patterns of collusion among the major manufacturing groups in Italy, Germany, and France. The presence of a domestic producer affects however, the way that foreign manufacturers (especially Japanese) price their cars. We also point to the fact that income aspects are not to be neglected. The UK market, which was historically thought of as one of the most expensive markets, turns out to be the most competitive market when income controls are taken into account. This is consistent with the actual market concentration indexes in the UK.

Suggested Citation

  • Vlad Radoias, 2014. "The myth of the domestic brand bias for automobiles in the european union," Economics Bulletin, AccessEcon, vol. 34(4), pages 2115-2127.
  • Handle: RePEc:ebl:ecbull:eb-14-00467
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2014/Volume34/EB-14-V34-I4-P196.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Salvador Gil-Pareja & Simon Sosvilla-Rivero, 2007. "Price convergence in the European car market," Applied Economics, Taylor & Francis Journals, vol. 40(2), pages 241-250.
    2. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
    3. Kirman, Alan & Schueller, Nathalie, 1990. "Price Leadership and Discrimination in the European Car Market," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 69-91, September.
    4. Pinelopi Koujianou Goldberg & Frank Verboven, 2001. "The Evolution of Price Dispersion in the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 811-848.
    5. Gil-Pareja, Salvador, 2003. "Pricing to market behaviour in European car markets," European Economic Review, Elsevier, vol. 47(6), pages 945-962, December.
    6. Victor Ginsburgh & Yves Mertens, 1985. "Product differentiation and discrimination in the European Community: the case of automobiles," ULB Institutional Repository 2013/1755, ULB -- Universite Libre de Bruxelles.
    7. Arguea, Nestor M. & Hsiao, Cheng, 1993. "Econometric issues of estimating hedonic price functions : With an application to the U.S. market for automobiles," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 243-267, March.
    8. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    9. Arguea, N M & Hsiao, C & Taylor, G A, 1994. "Estimating Consumer Preferences Using Market Data--An Application to U.S. Automobile Demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(1), pages 1-18, Jan.-Marc.
    10. Mertens, Yves & Ginsburgh, Victor, 1985. "Product Differentiation and Price Discrimination in the European Community: The Case of Automobiles," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 151-166, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vlad Radoias, 2016. "Direct and indirect price discrimination in the automotive industries of the European Union," Empirical Economics, Springer, vol. 50(3), pages 975-990, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dvir, Eyal & Strasser, Georg, 2018. "Does marketing widen borders? Cross-country price dispersion in the European car market," Journal of International Economics, Elsevier, vol. 112(C), pages 134-149.
    2. Vlad Radoias, 2016. "Direct and indirect price discrimination in the automotive industries of the European Union," Empirical Economics, Springer, vol. 50(3), pages 975-990, May.
    3. Leheyda, Nina, 2008. "Geographical and Multi-product Linkages of Markets: Impact on Firm Equilibrium Interactions (Some Evidence from the European Car Market)," ZEW Discussion Papers 08-119, ZEW - Leibniz Centre for European Economic Research.
    4. Guillaume Gaulier & Séverine Haller, 2000. "The Convergence of Automobile Prices in the European Union: an Empirical Analysis for the Period 1993-1999," Working Papers 2000-14, CEPII research center.
    5. Séverine Haller & Guillaume Gaulier, 2003. "Les prix automobile dans l’Union européenne : y a-t-il eu convergence depuis 1993 ?," Économie et Prévision, Programme National Persée, vol. 157(1), pages 83-96.
    6. Pinelopi Koujianou Goldberg & Frank Verboven, 2001. "The Evolution of Price Dispersion in the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 811-848.
    7. A. Auer, Raphael & Chaney, Thomas & Sauré, Philip, 2018. "Quality pricing-to-market," Journal of International Economics, Elsevier, vol. 110(C), pages 87-102.
    8. Reis, Hugo J. & Santos Silva, J.M.C., 2006. "Hedonic prices indexes for new passenger cars in Portugal (1997-2001)," Economic Modelling, Elsevier, vol. 23(6), pages 890-908, December.
    9. Goldberg, P.K. & Verboven, F.L., 1999. "The Evolution of Price Discrimination in the European Car Market," Other publications TiSEM 78ee9b01-2794-4a7b-9147-a, Tilburg University, School of Economics and Management.
    10. Cabolis, Christos & Clerides, Sofronis & Ioannou, Ioannis & Senft, Daniel, 2007. "A textbook example of international price discrimination," Economics Letters, Elsevier, vol. 95(1), pages 91-95, April.
    11. Salvador Gil-Pareja & Simon Sosvilla-Rivero, 2007. "Price convergence in the European car market," Applied Economics, Taylor & Francis Journals, vol. 40(2), pages 241-250.
    12. Raphael A. Auer, 2015. "Exchange Rate Pass‐Through, Domestic Competition, and Inflation: Evidence from the 2005–08 Revaluation of the Renminbi," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(8), pages 1617-1650, December.
    13. Duch-Brown, Néstor & Grzybowski, Lukasz & Romahn, André & Verboven, Frank, 2021. "Are online markets more integrated than traditional markets? Evidence from consumer electronics," Journal of International Economics, Elsevier, vol. 131(C).
    14. Noton, Carlos, 2016. "Structural estimation of price adjustment costs in the European car market," International Journal of Industrial Organization, Elsevier, vol. 49(C), pages 105-147.
    15. Auer, Raphael A. & Schoenle, Raphael S., 2016. "Market structure and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 98(C), pages 60-77.
    16. Linhui Yu & Jiangyong Lu & Pinliang Luo, 2013. "The Evolution of Price Dispersion in China's Passenger Car Markets," The World Economy, Wiley Blackwell, vol. 36(7), pages 947-965, July.
    17. D.S. Prasada Rao & Alicia N. Rambaldi & K. Renuka Ganegodage & L. T. Huynh & Howard E. Doran, 2017. "UQICD v2.1.2 User Guide," Discussion Papers Series 534, School of Economics, University of Queensland, Australia.
    18. Victor Ginsburgh & Shlomo Weber, 2002. "Product Lines and Price Discrimination in the European Car Market," Manchester School, University of Manchester, vol. 70(1), pages 101-114, January.
    19. Alessandro Gavazza & Alessandro Lizzeri & Nikita Roketskiy, 2014. "A Quantitative Analysis of the Used-Car Market," American Economic Review, American Economic Association, vol. 104(11), pages 3668-3700, November.
    20. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.

    More about this item

    Keywords

    Price Dispersion; Domestic Bias; Collusion;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-14-00467. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.