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Market Shares Follow the Zipf Distribution

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  • Riemer, Hila

    (U of Illinois at Urbana-Champaign)

  • Mallik, Suman

    (U of Illinois at Urbana-Champaign)

  • Sudharshan, Devanathan

    (U of Illinois at Urbana-Champaign)

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    Abstract

    The Zipf distribution is known to describe various natural phenomena, including city populations in the United States, frequency of English words in literature, immune system response in human beings, and certain aspects of Internet traffic. Using data from 70 markets, we show that the market shares by rank order follow the Zipf distribution. Our work makes a fundamental contribution in understanding the distribution of market shares, as we make no assumption about the order of entry and our results are valid for arbitrary number of competitors in market. We compare the predictions of our model with those from the analytical models in marketing literature. The comparison reveals that market share predicted by the Zipf model fits well with the predictions from the analytical models.

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    File URL: http://www.business.illinois.edu/Working_Papers/papers/02-0125.pdf
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    Bibliographic Info

    Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 02-0125.

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    Date of creation: 2002
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    Handle: RePEc:ecl:illbus:02-0125

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    Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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    9. Christina L. Brown & James M. Lattin, 1994. "Investigating the Relationship Between Time in Market and Pioneering Advantage," Management Science, INFORMS, vol. 40(10), pages 1361-1369, October.
    10. Glazer, Amihai, 1985. "The Advantages of Being First," American Economic Review, American Economic Association, vol. 75(3), pages 473-80, June.
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    12. K. Sridhar Moorthy, 1988. "Product and Price Competition in a Duopoly," Marketing Science, INFORMS, vol. 7(2), pages 141-168.
    13. Hauser, John R & Wernerfelt, Birger, 1990. " An Evaluation Cost Model of Consideration Sets," Journal of Consumer Research, University of Chicago Press, vol. 16(4), pages 393-408, March.
    14. Agarwal, Rajshree & Gort, Michael, 1996. "The Evolution of Markets and Entry, Exit and Survival of Firms," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 489-98, August.
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