Market Shares Follow the Zipf Distribution

Hila Riemer, Suman Mallik and Devanathan Sudharshan
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Hila Riemer: U of Illinois at Urbana-Champaign
Suman Mallik: U of Illinois at Urbana-Champaign
Devanathan Sudharshan: U of Illinois at Urbana-Champaign

Working Papers from University of Illinois at Urbana-Champaign, College of Business

Abstract: The Zipf distribution is known to describe various natural phenomena, including city populations in the United States, frequency of English words in literature, immune system response in human beings, and certain aspects of Internet traffic. Using data from 70 markets, we show that the market shares by rank order follow the Zipf distribution. Our work makes a fundamental contribution in understanding the distribution of market shares, as we make no assumption about the order of entry and our results are valid for arbitrary number of competitors in market. We compare the predictions of our model with those from the analytical models in marketing literature. The comparison reveals that market share predicted by the Zipf model fits well with the predictions from the analytical models.

Date: 2002
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