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Market Size Matters

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  • Jeffrey R. Campbell
  • Hugo A. Hopenhayn

Abstract

This paper characterizes the effects of market size on the size distribution of establishments for thirteen retail trade industries across 225 U.S. cities. In nearly every industry we examine, establishments are larger in larger cities, and in four industries the dispersion of establishment sizes depends on market size. Models of competition in which individual producers' markups do not depend on the number of producers are inconsistent with these observations. Models in which competition is tougher in larger markets can reproduce the positive effect of market size on establishments' average size.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9113.

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Date of creation: Aug 2002
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Publication status: published as Campbell, Jeffrey R. and Hugo A. Hopenhayn. "Market Size Matters," Journal of Industrial Economics, 2005, v53(1,Mar), 1-25.
Handle: RePEc:nbr:nberwo:9113

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  9. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  10. Wolinsky, Asher, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 493-511, August.
  11. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
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