Université de Lausanne
Faculté des HEC
Département d'économétrie et d'économie politique

Cahier de recherches économiques du DEEP No. 15.04

Catherine Roux, Luís Santos-Pinto and Christian Thöni

Home Bias in Multimarket Cournot Games

April 2015

Abstract

We explore the role played by trade costs for the home bias in trade. In a series of Cournot duopoly experiments with a home and an export market, we compare output choices when firms face different levels of export costs. We find that there is two-way trade in identical products and that firms hold the majority market share in their home market. The resulting home bias turns out to be, however, stronger than that predicted by theory, and it even occurs without trade costs. We have strong evidence that collusion contributes to the home bias observed in our experiment.

JEL Classification: F12; L13; C91

Keywords: Intra-Industry Trade; Spatial Oligopoly; Home Bias; Collusion; Experiment