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The myth of the domestic brand bias for automobiles in the European Union

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  • Vlad Radoias

    (Towson University)

Abstract

The domestic brand bias has been one of the most commonly used explanations for automobiles price differences across international borders in the EU. Using a panel dataset comprising of 51 models across 21 EU member states, we take advantage of cross country heterogeneity, and find that, controlling for income aspects, the domestic brand bias does not work in the way it was originally thought of. Instead, we find patterns of collusion among the major manufacturing groups in Italy, Germany, and France. The presence of a domestic producer affects however, the way that foreign manufacturers (especially Japanese) price their cars. We also point to the fact that income aspects are not to be neglected. The UK market, which was historically thought of as one of the most expensive markets, turns out to be the most competitive market when income controls are taken into account. This is consistent with the actual market concentration indexes in the UK.

Suggested Citation

  • Vlad Radoias, 2015. "The myth of the domestic brand bias for automobiles in the European Union," Economics Bulletin, AccessEcon, vol. 35(1), pages 70-82.
  • Handle: RePEc:ebl:ecbull:eb-14-01046
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    References listed on IDEAS

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    1. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
    2. Pinelopi Koujianou Goldberg & Frank Verboven, 2001. "The Evolution of Price Dispersion in the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 811-848.
    3. Arguea, Nestor M. & Hsiao, Cheng, 1993. "Econometric issues of estimating hedonic price functions : With an application to the U.S. market for automobiles," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 243-267, March.
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    8. Arguea, N M & Hsiao, C & Taylor, G A, 1994. "Estimating Consumer Preferences Using Market Data--An Application to U.S. Automobile Demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(1), pages 1-18, Jan.-Marc.
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    Cited by:

    1. Vlad Radoias, 2016. "Direct and indirect price discrimination in the automotive industries of the European Union," Empirical Economics, Springer, vol. 50(3), pages 975-990, May.

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    More about this item

    Keywords

    Price Dispersion; Domestic Bias; Collusion;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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