How Do Firms Build Market Share?

26 Pages Posted: 16 Jul 2018 Last revised: 1 Oct 2022

See all articles by Doireann Fitzgerald

Doireann Fitzgerald

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Anthony Priolo

Lancaster University - Lancaster University Management School

Multiple version iconThere are 3 versions of this paper

Date Written: July 2018

Abstract

The question of how firms build market share matters for firm dynamics, business cycles, international trade, and industrial organization. Using Nielsen Retail Scanner data for the United States, we document that in the consumer food industry, brands experience substantial growth in market share in the first four years after successful entry into a regional market. However, markups are flat with respect to brand tenure. This finding is at odds with a large literature on customer markets which argues that firms acquire customers by temporarily offering low markups, and later raise markups once customers are locked in. However, it is consistent with a literature which emphasizes the importance of marketing and advertising activities for building market share.

Suggested Citation

Fitzgerald, Doireann and Priolo, Anthony, How Do Firms Build Market Share? (July 2018). NBER Working Paper No. w24794, Available at SSRN: https://ssrn.com/abstract=3214337

Doireann Fitzgerald (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

Anthony Priolo

Lancaster University - Lancaster University Management School ( email )

Economics Department,
LUMS,
Bailrigg Lancaster, LA1 4YX
United Kingdom

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