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PRODUCT QUALITY AND MARKET SIZE -super-

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  • STEVEN BERRY
  • JOEL WALDFOGEL

Abstract

Do larger markets offer better products? The question has implications for theories of cities and theories of market organization. We document that in the restaurant industry, where quality is produced largely with variable costs, the range of qualities on offer increases in market size. In daily newspapers, where quality is produced with fixed costs, the average quality of products increases with market size, but the market does not offer much additional variety as it grows large. These results are consistent with IO theories of endogenous product quality and with theories that emphasize the consumption advantages of cities. Copyright 2010 The Authors. Journal compilation 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • Steven Berry & Joel Waldfogel, 2010. "PRODUCT QUALITY AND MARKET SIZE -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 1-31, March.
  • Handle: RePEc:bla:jindec:v:58:y:2010:i:1:p:1-31
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    References listed on IDEAS

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    1. Paul B. Ellickson, 2007. "Does Sutton apply to supermarkets?," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 43-59, March.
    2. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
    3. Clarissa Yeap, 2006. "The Production Decisions of Large Competitors: Detecting Cost Advantages and Strategic Behavior in Restaurants," Working Papers 06-19, Center for Economic Studies, U.S. Census Bureau.
    4. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
    5. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    6. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2005. "Market Size Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 1-25, March.
    7. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-146, December.
    8. Lisa George & Joel Waldfogel, 2003. "Who Affects Whom in Daily Newspaper Markets?," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 765-784, August.
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    Citations

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    Cited by:

    1. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2010. "Price and quality in spatial competition," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 471-480, November.
    2. Matthew Gentzkow & Jesse M. Shapiro, 2015. "Ideology and Online News," NBER Chapters,in: Economic Analysis of the Digital Economy, pages 169-190 National Bureau of Economic Research, Inc.
    3. Picard, Pierre M. & Okubo, Toshihiro, 2012. "Firms' locations under demand heterogeneity," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 961-974.
    4. Martin Labaj & Karol Morvay & Peter Silanic & Christoph Weiss & Biliana Yontcheva, 2016. "Market Structure and Competition in Transition:Results from a Spatial Analysis," Department of Economics Working Papers wuwp218, Vienna University of Economics and Business, Department of Economics.
    5. Charles Angelucci & Julia Cage, 2015. "Newspapers in Times of Low Advertising Revenues," Sciences Po publications info:hdl:2441/26t617gatp8, Sciences Po.
    6. Jeffrey R. Campbell & Thomas Hubbard, 2016. "The Economics of "Radiator Springs:" Industry Dynamics, Sunk Costs, and Spatial Demand Shifts," NBER Working Papers 22289, National Bureau of Economic Research, Inc.
    7. Stef Proost & Jacques-Francois Thisse, 2017. "What Can Be Learned from Spatial Economics?," HSE Working papers WP BRP 167/EC/2017, National Research University Higher School of Economics.
    8. Shon M. Ferguson, 2015. "Endogenous Product Differentiation, Market Size and Prices," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 45-61, February.
    9. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2014. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," American Economic Review, American Economic Association, vol. 104(10), pages 3073-3114, October.
    10. Ederington, Josh & Sandford, Jeremy, 2016. "Employer discrimination and market structure: Does more concentration mean more discrimination?," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 1-33.
    11. Martijn J. Burger & Evert J. Meijers & Marloes M. Hoogerbrugge & Jaume Masip Tresserra, 2015. "Borrowed Size, Agglomeration Shadows and Cultural Amenities in North-West Europe," European Planning Studies, Taylor & Francis Journals, vol. 23(6), pages 1090-1109, June.
    12. T. Randolph Beard, Jeffrey T. Macher, John W. Mayo, . "'Can you Hear Me Now?' Exit, Voice and Loyalty Under Increasing Competition," Journal of Law and Economics, University of Chicago Press, vol. 58(3).
    13. Pierre Dubois & Olivier de Mouzon & Fiona Scott-Morton & Paul Seabright, 2015. "Market size and pharmaceutical innovation," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 844-871, October.
    14. repec:bla:manchs:v:85:y:2017:i:5:p:511-540 is not listed on IDEAS
    15. Ermelinda Lopes & Ermelinda Lopes Silva, 2016. "Tieboutian market Structure and Collective Decision Process Within a Global Competition Policy," EcoMod2016 9292, EcoMod.
    16. Li, Yan & Lyons, Bruce, 2012. "Market structure, regulation and the speed of mobile network penetration," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 697-707.
    17. Mariana Cunha & António Osório & Ricardo Ribeiro, 2016. "Endogenous product design and quality with rationally inattentive consumers," Working Papers de Economia (Economics Working Papers) 03, Católica Porto Business School, Universidade Católica Portuguesa.
    18. Senyuta, Olena & Žigić, Krešimir, 2016. "Managing spillovers: An endogenous sunk cost approach," Information Economics and Policy, Elsevier, vol. 35(C), pages 45-64.
    19. Dakshina De Silva & Caroline Elliott & Robert Simmons, 2013. "Restaurant wars," Working Papers 44312700, Lancaster University Management School, Economics Department.
    20. Joel Waldfogel, 2015. "Digitization and the Quality of New Media Products: The Case of Music," NBER Chapters,in: Economic Analysis of the Digital Economy, pages 407-442 National Bureau of Economic Research, Inc.
    21. Miao, Zhuang & Long, Ngo Van, 2017. "Multiple-Quality Cournot Oligopoly and the Role of Market Size," MPRA Paper 82095, University Library of Munich, Germany.
    22. Hugh Gravelle & Rita Santos & Luigi Siciliani & Rosalind Goudie, 2012. "Hospital Quality Competition Under Fixed Prices," Working Papers 080cherp, Centre for Health Economics, University of York.

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