Consumption home bias and ethnocentrism: an international duopoly

Jean Gabszewicz, Ornella Tarola and Skerdilajda Zanaj

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We define a model with two countries and two vertically differentiated goods, a high and a low quality variant, and heterogenous consumers with respect to their willingness to pay for quality. Consumers in one country are ethnocentric in consumption. They thrive additional satisfaction when consuming a domestic good rather than a foreign one, since only the former can satisfy their sense of place. We investigate the role of trade costs and ethnocentric attitude in shaping the equilibrium configuration of the international duopoly.

Keywords: home bias; relative preferences; vertically differentiated model. (search for similar items in EconPapers)
JEL-codes: D43 F10 F15 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:19-13

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