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Discussion Paper Details

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Title: What Drives Home Market Advantage?

Author(s): Kerem Cosar, Paul L. E. Grieco, Shengyu Li and Felix Tintelnot

Publication Date: September 2015

Keyword(s): automobile industry, market segmentation and trade and foreign direct investment

Programme Area(s): Industrial Organization and International Trade and Regional Economics

Abstract: In the automobile industry, as in many tradable goods markets, firms usually earn their highest market share within their domestic market. The goal of this paper is to disentangle the supply- and demand-driven sources of the home market advantage. While trade costs, foreign production costs, and taste heterogeneity all matter for market outcomes, we find that a preference for home brands is the single most important driver of home market advantage - even after controlling for brand histories and dealer networks. Furthermore, we also find that consumers favor domestically producing brands regardless of the historical brand origin.

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Bibliographic Reference

Cosar, K, Grieco, P, Li, S and Tintelnot, F. 2015. 'What Drives Home Market Advantage?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10852