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Product Quality and Market Size

Author

Listed:
  • Berry, Steven

    (Yale U)

  • Waldfogel, Joel

    (U of Pennsylvania)

Abstract

Do larger markets offer better products? The question has implications both for theories of cities and for 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, with each product maintaining a small market share. 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 recent IO theories of endogenous product quality and are consistent with theories of cities that place an emphasis on the consumption advantages of cities.

Suggested Citation

  • Berry, Steven & Waldfogel, Joel, 2005. "Product Quality and Market Size," Working Papers 1, Yale University, Department of Economics.
  • Handle: RePEc:ecl:yaleco:1
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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