Market Structure and the Geographic Distribution of Brand Shares in Consumer Package Goods Industries
Bart J. Bronnenberg
CentER, Tilburg University
Sanjay K. Dhar
University of Chicago - Marketing Management
Jean-Pierre H. Dube
University of Chicago - Booth School of Business
September 1, 2005
We describe industrial market structure using a unique database spanning 31 consumer package goods (CPG) industries, 39 months, and the 50 largest US metropolitan markets. We organize our description of market structure around the notion that firms can improve brand perceptions through advertising investments, as in Sutton's endogenous sunk cost theory. In the data, observed advertising levels escalate (i.e. larger brands) in larger markets while the number of advertised brands within an industry remains stable. Correspondingly, observed concentration levels in advertising-intensive industries are bounded away from zero irrespective of market size. For two industries, we collect historic order-of-entry data. The geographic distribution of entry is found to account for the levels, rank-orders and covariation in the geographic distribution of brand shares, perceived brand qualities and advertising effort. Interestingly, alternative potential sources of geographic asymmetry on both the supply and demand sides do not mimic the geographic patterns of shares. In general, our findings highlight several striking persistent geographic patterns in the industrial market structures of CPG industries.
Number of Pages in PDF File: 46
Keywords: Endogenous Sunk Costs, Market Structure, Advertising, Entry, Geography
JEL Classification: L11, L66, M30, M37, R12working papers series
Date posted: January 20, 2005
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