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Some empirical regularities in market shares
Rajeev Kohli and Raaj Sah
Management Science, Volume 52, Number 11, November 2006, pages 1792-1798.
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.
Previous working versions include:
“Some patterns of market shares of brands within and across product categories.” University of Chicago, Harris School of Public Policy. Working paper series 06.04. December 2005.