Abstract
AbstractWe investigate the interaction between home bias and market power by estimating an equilibrium oligopoly model using a dataset of new car registrations across Chinese provinces. We find a more elastic demand for home brands on average, despite a consistently stronger preference and cost advantages for local manufacturers. This limits the extent of home bias. Ignoring such effect would lead to an overestimation of home market share by 281% and overstate the cross region trade barriers. We also find that home bias is gender neutral and increases with age.
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