What Drives Home Market Advantage?

A. Kerem Coşar, Paul L. E. Grieco, Shengyu Li and Felix Tintelnot

No 5544, CESifo Working Paper Series from CESifo

Abstract: In the automobile industry, as in many tradable goods markets, firms earn their highest market share within their domestic market. This home market advantage persists despite substantial integration of international markets during the past several decades. The goal of this paper is to quantify the supply- and demand-driven sources of the home market advantage and to understand their implications for international trade and investment. Building on the random coefficients demand model developed by Berry, Levinsohn, and Pakes (1995), we estimate demand and supply in the automobile industry for nine countries across three continents, allowing for unobserved taste and cost variation at the car model and market levels. While trade and foreign production costs as well as taste heterogeneity matter for market outcomes, we find that preference for domestic brands is the single most important driver of home market advantage - even after controlling for brand histories and dealer networks.

Date: 2015
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: What drives home market advantage? (2018)
Working Paper: What Drives Home Market Advantage? (2015)
Working Paper: What Drives Home Market Advantage? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5544

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