Firms don’t just differ in how efficiently they produce goods or services. They also differ in how many customers they can reach. That simple reminder is at the heart of new research by Mahmood Haddara, a PhD candidate with the Department of Economics. According to traditional economic models, the reason some firms in the same industry are bigger than others can be explained by their greater productivity and manufacturing efficiency. According to Haddara’s model, there is one more essential measure at play. The number of customers the firms can access. When analysis of productivity and customer access aren’t both considered, Haddara argues, research there isn’t a fulsome view of economic policy that affects everything from subsidy programs to how firms are taxed.
