Oliver Griffiths

Consumer Patriotism

On a recent trip to the local bike shop I overheard another customer deliberating between two bikes - a Cannondale and another make. Now the British government doesn't endorse any particular bike brand.  But I do. I love Cannondales and own two. But they're definitely pricey, as the customer in the bike shop discovered. The Cannondale was about $100 more expensive than the other, equivalent bike and he quite naturally asked why it cost more. The assistant's answer was that it was because Cannondales are made in the USA (in Pennsylania) while the other make was made in Taiwan. This isn't the reason I buy them but it got me wondering about the premium that home producers can charge over competitors from abroad for similar goods. And whether you could put together a league table comparing the different level of premium that home producers could charge in different countries.
 
The economist's answer is that you should just buy the best goods at the best price. End of story. That will force the competition to catch-up or get out of the business, raising standards across the board. But emotion seems to pull the other way. This phenomenon has been given the rather grand title of consumer patriotism.
 
A 2007 Zogby poll found that one in three Americans would be willing to pay four times as much for American-made toys over foreign substitutes (which in effect means Chinese goods, as China has over 90% of the global market in toys). Paying four times as much sounds absurd. But if true, MBA graduates must be flooding into toy manufacturing. Japanese consumers have also, famously, been willing to pay a substantial premium for Japanese rice - though in that case supposedly because of a superior level of stickiness. (Consumer patriotism - if only I had known the phrase - also dictated the choice of our family car. My father bought a succession of unreliable estate cars made by British Leyland. It didn't save British Leyland.) One of the least effective consumer patriotism initiatives was - or so I recall from law school - a Buy Irish campaign that was brought to the European Court of Justice for being in contravention of Article 85 of the EC Treaty (one of the EU's competition articles, now changed to Article 81) because it discriminated between producers in the EU. One defence put forward was the fact that sales of Irish goods had actually dropped during the campaign. So my initial international consumer patriotism league table runs: USA, Japan, UK, Ireland. 
 
Anyway, the customer in the bike shop decided not to buy the Cannondale.

Posted at 20:49 21 September 2008 by Oliver Griffiths  |  Comments[2]