Minimum Market Share

This paper analyzes a specific model of oligopolistic competition involving product differentiation, marketing activities, and economies of scale in production. This model is consistent with sales response models which have been justified on theoretical and empirical bases. It is shown that at a Nash equilibrium each firm must have market share equal to zero or greater than a threshold value. This result has implications for determination of minimum firm size, the effectiveness of a low market share strategy, entry barriers, and the likelihood of concentration in an industry. The paper explores these implications and relates them to various theories and hypotheses in industrial organization and strategic planning.