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Consumption home bias and ethnocentrism: an international duopoly

Author

Listed:
  • Jean Gabszewicz

    (Université catholique de Louvain, Belgium)

  • Ornella Tarola

    (University of Rome, Italy)

  • Skerdilajda Zanaj

    (CREA, Université du 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.

Suggested Citation

  • Jean Gabszewicz & Ornella Tarola & Skerdilajda Zanaj, 2019. "Consumption home bias and ethnocentrism: an international duopoly," DEM Discussion Paper Series 19-13, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:19-13
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    home bias; relative preferences; vertically differentiated model.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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