Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

What Drives Home Market Advantage?

July 2016
A. Kerem Coşar, Paul L.E. Grieco, Shengyu Li, Felix Tintelnot

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.

Publication Type: 
Working Paper
Institution: 
SSRN
Series Name: 
Becker Friedman Institute Working Paper Series