Heterogeneity in Conformism, Firm Selection, and Home Bias

Sergey Kichko and Pierre Picard

HSE Working papers from National Research University Higher School of Economics

Abstract: This paper discusses the impact of conformism on product quality, firm selection, and trade patterns. It shows that when consumers have a higher degree of conformism and/or their distribution of conformism becomes more concentrated, the equilibrium average demand falls while product quality rises in a closed economy. In an international trade context, this strengthens the home consumption bias when consumers conform to the behavior of local people. The home bias is mitigated under globalization where individuals tend to conformto peopleworldwide. The paper also discusses the conditions under which conformism and conspicuousness are reconciled.

Keywords: heterogeneity in conformism; product quality; firmheterogeneity; home bias. (search for similar items in EconPapers)
JEL-codes: F12 L11 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2018
New Economics Papers: this item is included in nep-ind and nep-int
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Published in WP BRP Series: Economics / EC, March 2018, pages 1-33

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https://wp.hse.ru/data/2018/03/27/1164890667/187EC2018.pdf (application/pdf)

Related works:
Working Paper: Heterogeneity in Conformism, Firm Selection, and Home Bias (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:187/ec/2018

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