IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v248y2025ics0165176525000412.html
   My bibliography  Save this article

Market size, firm size and reputation for quality

Author

Listed:
  • Fishman, Arthur
  • Jelnov, Artyom

Abstract

We analyze the effect of firm’s size on firm’s ability to establish a reputation for quality. We consider markets in which consumers may be informed about a firm’s past quality through word of mouth referrals from past customers. In this setting consumers are more likely to become informed the greater the firm’s market share. This leads to a theory of equilibrium firm size which is consistent with findings that firm size increases with market size (Campbell and Hopenhayn, 2005) and the long tail hypothesis (Anderson, 2008).

Suggested Citation

  • Fishman, Arthur & Jelnov, Artyom, 2025. "Market size, firm size and reputation for quality," Economics Letters, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000412
    DOI: 10.1016/j.econlet.2025.112204
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176525000412
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2025.112204?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Asher Wolinsky, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 493-511.
    2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    3. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2005. "Market Size Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 1-25, March.
    4. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1990. "Toward a Theory of Discounted Repeated Games with Imperfect Monitoring," Econometrica, Econometric Society, vol. 58(5), pages 1041-1063, September.
    5. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    6. Fishman, Arthur, 2021. "Finitely repeated search and the diamond paradox," Economics Letters, Elsevier, vol. 205(C).
    7. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    8. Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-536, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, September.
    2. Athreya, Kartik B., 2014. "Big Ideas in Macroeconomics: A Nontechnical View," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019736, December.
    3. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    4. Natalia Fabra & Juan-Pablo Montero, 2022. "Product Lines and Price Discrimination in Markets with Information Frictions," Management Science, INFORMS, vol. 68(2), pages 981-1001, February.
    5. D’Ignazio, Alessio & Giovannetti, Emanuele, 2015. "Predicting internet commercial connectivity wars: The impact of trust and operators’ asymmetry," International Journal of Forecasting, Elsevier, vol. 31(4), pages 1127-1137.
    6. Jean J. Gabszewicz & Jacques-François Thisse, 2000. "Microeconomic theories of imperfect competition," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 47-99.
    7. Chia-Ling Hsu & Rafael Matta & Sergey V. Popov & Takeharu Sogo, 2017. "Optimal Product Placement," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(1), pages 127-145, August.
    8. Konishi, Hideo & Sandfort, Michael T., 2002. "Expanding demand through price advertisement," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 965-994, September.
    9. Schiff, Nathan & Cosman, Jacob & Dai, Tianran, 2023. "Delivery in the city: Differentiated products competition among New York restaurants," Journal of Urban Economics, Elsevier, vol. 134(C).
    10. 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.
    11. Boone, J., 2002. "'Be Nice Unless it Pays to Fight' : A New Theory of Price Determination with Implications for Competition Policy," Discussion Paper 2002-23, Tilburg University, Center for Economic Research.
    12. Garrod, Luke & Olczak, Matthew, 2018. "Explicit vs tacit collusion: The effects of firm numbers and asymmetries," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 1-25.
    13. Boone, J., 2003. "'Be nice, unless it pays to fight' : A new theory of price determination with implications for competition policy," Other publications TiSEM 7066cb71-3c22-4565-8c71-5, Tilburg University, School of Economics and Management.
    14. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    15. Arbatskaya, Maria & Konishi, Hideo, 2012. "Referrals in search markets," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 89-101.
    16. Andrew Rhodes & Jidong Zhou, 2019. "Consumer Search and Retail Market Structure," Management Science, INFORMS, vol. 67(6), pages 2607-2623, June.
    17. Bagwell, Kyle & Wolinsky, Asher, 2002. "Game theory and industrial organization," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 49, pages 1851-1895, Elsevier.
    18. Ely, Jeffrey C. & Valimaki, Juuso, 2002. "A Robust Folk Theorem for the Prisoner's Dilemma," Journal of Economic Theory, Elsevier, vol. 102(1), pages 84-105, January.
    19. Liliane Karlinger, 2008. "How Demand Information Can Destabilize a Cartel," Vienna Economics Papers 0803, University of Vienna, Department of Economics.
    20. Shon M. Ferguson, 2015. "Endogenous Product Differentiation, Market Size and Prices," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 45-61, February.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000412. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.