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Some Empirical Regularities in Market Shares

  • Rajeev Kohli

    ()

    (Graduate School of Business, Columbia University, 506 Uris Hall, New York, New York 10027)

  • Raaj Sah

    ()

    (Harris School of Public Policy, University of Chicago, Chicago, Illinois 60637)

We present some empirical regularities in the market shares of brands. Our cross-sectional data on market shares consists of 1,171 brands in 91 product categories of foods and sporting goods sold in the United States. One of our results is that the pattern of market shares for each of the categories (many of which are fundamentally dissimilar, such as breakfast cereals and rifles) is represented well by the power law. The power law also does better than an alternative model--namely, the exponential form--which has previously been studied in the literature but without having been compared to any alternative. These two models have sharply different implications; for example, the power law predicts that the ratio of market shares for two successively ranked brands becomes smaller as one progresses from higher-ranked to lower-ranked brands, whereas the exponential form predicts that this ratio is a constant. Our findings have several managerial and research implications, which we summarize.

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File URL: http://dx.doi.org/10.1287/mnsc.1060.0572
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 52 (2006)
Issue (Month): 11 (November)
Pages: 1792-1798

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Handle: RePEc:inm:ormnsc:v:52:y:2006:i:11:p:1792-1798
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  1. Frank M. Bass, 1995. "Empirical Generalizations and Marketing Science: A Personal View," Marketing Science, INFORMS, vol. 14(3_supplem), pages G6-G19.
  2. Brock, W A, 1999. "Scaling in Economics: A Reader's Guide," Industrial and Corporate Change, Oxford University Press, vol. 8(3), pages 409-46, September.
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  4. Benoit Mandelbrot, 1963. "New Methods in Statistical Economics," Journal of Political Economy, University of Chicago Press, vol. 71, pages 421.
  5. Chung, Kee H & Cox, Raymond A K, 1994. "A Stochastic Model of Superstardom: An Application of the Yule Distribution," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 771-75, November.
  6. Peter M. Guadagni & John D. C. Little, 1983. "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, INFORMS, vol. 2(3), pages 203-238.
  7. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
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