Market Size Matters

53 Pages Posted: 16 Aug 2002

See all articles by Jeffrey R. Campbell

Jeffrey R. Campbell

Federal Reserve Bank of Chicago; CentER, Tilburg University

Hugo A. Hopenhayn

University of California, Los Angeles (UCLA) - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: August 2002

Abstract

This paper characterizes the effects of market size on the size distribution of establishments for thirteen retail trade industries across 225 U.S. cities. In nearly every industry we examine, establishments are larger in larger cities, and in four industries the dispersion of establishment sizes depends on market size. Models of competition in which individual producers' markups do not depend on the number of producers are inconsistent with these observations. Models in which competition is tougher in larger markets can reproduce the positive effect of market size on establishments' average size.

Suggested Citation

Campbell, Jeffrey R. and Hopenhayn, Hugo A., Market Size Matters (August 2002). NBER Working Paper No. w9113. Available at SSRN: https://ssrn.com/abstract=324055

Jeffrey R. Campbell (Contact Author)

Federal Reserve Bank of Chicago ( email )

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HOME PAGE: http://www.jyrc.org

CentER, Tilburg University ( email )

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Tilburg, 5000 LE
Netherlands

Hugo A. Hopenhayn

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

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