Market Structure and the Geographic Distribution of Brand Shares in Consumer Package Goods Industries

46 Pages Posted: 20 Jan 2005

See all articles by Bart J. Bronnenberg

Bart J. Bronnenberg

Tilburg University, CentER

Sanjay K. Dhar

University of Chicago - Marketing Management

Jean-Pierre Dubé

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: September 1, 2005

Abstract

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.

Keywords: Endogenous Sunk Costs, Market Structure, Advertising, Entry, Geography

JEL Classification: L11, L66, M30, M37, R12

Suggested Citation

Bronnenberg, Bart J. and Dhar, Sanjay K. and Dube, Jean-Pierre H., Market Structure and the Geographic Distribution of Brand Shares in Consumer Package Goods Industries (September 1, 2005). Available at SSRN: https://ssrn.com/abstract=651321 or http://dx.doi.org/10.2139/ssrn.651321

Bart J. Bronnenberg

Tilburg University, CentER ( email )

Warandelaan 2
Tilburg, 5037 AB
Netherlands
+31 13 466 8939 (Phone)
+31 13 466 8354 (Fax)

Sanjay K. Dhar

University of Chicago - Marketing Management ( email )

Rosenwald 331C
Chicago, IL 60637
United States
773-702-3005 (Phone)
773-702-0458 (Fax)

Jean-Pierre H. Dube (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://gsb.uchicago.edu/fac/jean-pierre.dube

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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