Product Quality and Market Size

31 Pages Posted: 2 Mar 2010

See all articles by Joel Waldfogel

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management; National Bureau of Economic Research (NBER); University of Minnesota - Twin Cities - Department of Economics

Abstract

Do larger markets offer better products? The question has implications for theories of cities and 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. 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 IO theories of endogenous product quality and with theories that emphasize the consumption advantages of cities.

Suggested Citation

Waldfogel, Joel, Product Quality and Market Size. The Journal of Industrial Economics, Vol. 58, Issue 1, pp. 1-31, March 2010, Available at SSRN: https://ssrn.com/abstract=1562151 or http://dx.doi.org/10.1111/j.1467-6451.2010.00404.x

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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