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Why is there a home bias? A case study of Wine

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  • Friberg, Richard
  • Paterson, Robert W
  • Richardson, Andrew D
Abstract
Domestic products have a disproportionately high market share on many goods markets. We examine the contribution of preferences to such "home bias", using detailed data on wine sales in New Hampshire (weekly sales by brand by store for one year). In counterfactual simulations, where we use the same set of products as currently available, the U.S. market share falls from 58 percent to 38 percent if all country-of-origin effects are set equal. Home bias on this market is not explained by higher marginal costs for imports or by lesser store coverage of imported brands. The evidence rather points to higher foreign fixed costs of entry, coupled with a preference for U.S. wines, as the main sources for the high domestic market share.

Suggested Citation

  • Friberg, Richard & Paterson, Robert W & Richardson, Andrew D, 2010. "Why is there a home bias? A case study of Wine," CEPR Discussion Papers 7885, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7885
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    Cited by:

    1. Kym Anderson & Glyn Wittwer, 2019. "Asia’s Evolving Role in Global Wine Markets," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 14, pages 347-377, World Scientific Publishing Co. Pte. Ltd..
    2. Puga, German & Sharafeyeva, Alfinura & Anderson, Kym, 2022. "Explaining bilateral patterns of global wine trade, 1962–2019," Journal of Wine Economics, Cambridge University Press, vol. 17(4), pages 338-344, November.
    3. Francesco Di Comite & Jacques-François Thisse & Hylke Vandenbussche, 2011. "Verti-zontal Differentiation in Monopolistic Competition," Development Working Papers 322, Centro Studi Luca d'Agliano, University of Milano, revised 17 Oct 2011.
    4. Kym Anderson, 2019. "Australian Wine Industry Competitiveness: Why so Slow to Emerge?," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 12, pages 283-308, World Scientific Publishing Co. Pte. Ltd..
    5. Kym Anderson & Vicente Pinilla, 2022. "Wine's belated globalization, 1845–2025," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(2), pages 742-765, June.
    6. Olper, Alessandro & Curzi, Daniele & Frisio, Dario Gianfranco & Raimondi, Valentina, 2012. "Home Bias in Consumption: A Comparison between Wine and Beer," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 61(04), pages 1-12, November.
    7. Kym Anderson, 2019. "Is Georgia the Next “New” Wine-Exporting Country?," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 13, pages 311-345, World Scientific Publishing Co. Pte. Ltd..
    8. Hejazi, Walid, 2022. "What subnational analysis could mean for IB research? Evidence for home bias reversals based on catchment area alcohol sales in Ontario," Journal of World Business, Elsevier, vol. 57(6).
    9. Zachary Cohle, 2021. "Innovative R&D offshoring in North–South trade: Theory and evidence," The World Economy, Wiley Blackwell, vol. 44(4), pages 904-929, April.
    10. Massimiliano Bratti & Giulia Felice, 2012. "Are Exporters More Likely to Introduce Product Innovations?," The World Economy, Wiley Blackwell, vol. 35(11), pages 1559-1598, November.
    11. Rigoberto A. Lopez & Xenia Matschke, 2012. "Home Bias in US Beer Consumption," Pacific Economic Review, Wiley Blackwell, vol. 17(4), pages 525-534, October.
    12. Olper, Alessandro & Curzi, Daniele & Frisio, Dario Gianfranco & Raimondi, Valentina, 2012. "Home Bias in Consumption: A Comparison between Wine and Beer," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 61(4).
    13. Kym Anderson, 2012. "Rural Development in Georgia: What Role for Wine Export Growth?," Wine Economics Research Centre Working Papers 2012-01, University of Adelaide, Wine Economics Research Centre.

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    More about this item

    Keywords

    Home bias; Border effects; Trade barriers;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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