Market Share and Customers’ Perceptions of Quality: When Can Firms Grow Their Way to Higher versus Lower Quality?

Abstract

Market share can influence perceived quality through several different mechanisms, including signaling, creating network externalities, and inclusion as an attribute in consumers’ quality functions. The direction of this potential effect is ambiguous. Making use of data on 85 different brands across 28 product categories, the authors explore the effect market share has on consumers’ perceptions of quality and the extent to which category-wide and brand-specific factors moderate this effect.