<p>While the impact of borders on price convergence for traded goods is well established, the role of regional disparities in product variety remains underexplored. We develop a model in which local products—those sold exclusively within a single country—emerge endogenously alongside traded products. In a symmetric setting, border costs affect pricing decisions but play a limited role in determining whether a product is local or traded; the latter depends on fixed production costs. The presence of local products leads to price divergence in traded goods by altering local competitive conditions. We show that failing to account for local products can lead to biased estimates of border effects in standard empirical designs. A Monte Carlo exercise illustrates the magnitude of this bias in a controlled setting, showing that omitting local competition leads to overestimation of border effects, while explicitly controlling for it restores near-unbiased estimation. Finally, we discuss empirical strategies to account for local product competition in applied border regressions.</p>