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Market size, firm size and reputation for quality

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  • 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
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm size; Market size; Reputation for quality; Word of mouth referrals; Imperfect monitoring;
    All these keywords.

    JEL classification:

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

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