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Some Patterns of Market Shares of Brands Within and Across Product Categories

Author

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  • Rajeev Kohli

    () (Columbia University)

  • Raaj Sah

    () (School of Economics and Social Sciences, Singapore Management University)

Abstract

This paper: (i) reports an empirical regularity in the market shares of brands; (ii) presents a theoretical framework for understanding the observed regularity; (iii) adduces additional empirical consequences of the framework, which are some counterintuitive relationships among market shares of brands across different product categories; and (iv) presents empirical evidence for these consequences, thus providing additional support for the theoretical framework. Our cross-sectional data on market shares consists of 1171 brands in 91 product categories of foods and sporting goods sold in the US. If we assign a lower rank to a brand with a higher market share, then the key empirical regularity is that, in each category, the ratio of market shares between two successively-ranked brands becomes smaller as one progresses from higher-ranked to lower-ranked brands. The power law represents these patterns well, in an absolute sense, and better than an alternative model, namely, the exponential form, which has been studied in the literature but without having been compared to any alternative. The latter form predicts that the ratio of the market shares of any two successively ranked brands is a constant. We present some potential implications of our findings for marketing practice and research. We also offer an interpretation of the previously known square-root relationship between market share and the order of entry of firms into an industry. The theoretical framework that we present for understanding the patterns reported here shares its foundation with that of the familiar Dirichlet-multinomial paradigm of brand purchases. This framework has some intuitive interpretations; it accommodates multiple product categories; and it allows for the entry and exit of brands over time.

Suggested Citation

  • Rajeev Kohli & Raaj Sah, 2005. "Some Patterns of Market Shares of Brands Within and Across Product Categories," Working Papers 11-2005, Singapore Management University, School of Economics.
  • Handle: RePEc:siu:wpaper:11-2005
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    References listed on IDEAS

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    Cited by:

    1. Hisano, Ryohei & Mizuno, Takayuki, 2011. "Sales distribution of consumer electronics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(2), pages 309-318.
    2. Rustam Ibragimov & Johan Walden, 2010. "Optimal Bundling Strategies Under Heavy-Tailed Valuations," Management Science, INFORMS, vol. 56(11), pages 1963-1976, November.
    3. P.J. Lamberson, 2016. "Winner-take-all or long tail? A behavioral model of markets with increasing returns," System Dynamics Review, System Dynamics Society, vol. 32(3-4), pages 233-260, July.

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