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Linda L. Heiiofs Robert Jacobson Market Share and Customers Perceptions of Quality: When Can Firms Grow Their Way to Higher Versus Lower Quality? 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 ef- fect 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. he business community has embraced the goal of im- tain or retain market share (in particular, ownership of the proving product quality with an almost religious fer- market leader title) and have used their market share po- vor, i Ninety-three percent of American firms have sition as the focal point in their advertising. To be able to ad- T implemented some form of quality improvement program vertise Taurus—Americas Best-Selling Car Again, Ford (Rust and Oliver 1994). When a firm improves product resorted to offering $1,000 rebates for the Taurus to protect quality, all else being equal, it shifts the demand curve. This its lead over Hondas Accord as the number-one-selling car enables the firm to charge a higher price and/or increase its in the United States (Naughton 1997). market share. But what sort of feedback effects do increas- The work performed to study the positive signaling ef- ing price and gaining market share have on quality? Prior re- fect of market share i