New Directions in Price Test for Market Definition

Zipitria, Leandro (2010): New Directions in Price Test for Market Definition.

Abstract

The appropriate definition of the relevant market is the main task in competition cases. But this definition, and its application, has proved difficult in abuse of dominance cases, mainly because of the cellophane fallacy. I offer new interpretations for the cointegration test and its vector error correction representation, in antitrust market definition. Then I apply them to define the beer market in Uruguay as an example.

• Item Type: MPRA Paper
• Language: English
• Keywords: Antitrust, market definition, price test, beer sector.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; L - Industrial Organization > L4 - Antitrust Issues and Policies > L40 - General; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L66 - Food ; Beverages ; Cosmetics ; Tobacco ; Wine and Spirits

References

Alexander, Carol and John Wyeth (1994). “Cointegration and Market Integration: An Application to the Indonesian Rice Market”. Journal of Development Studies, 30(2); 303-34.

Boshoff, Willem (2007). “Stationarity tests in geographic market definition: an application to South African milk markets”. South African Journal of Economics, 75(1); 1-14

Cartwright, Phillip A., David R. Kamerschen and Mei-Ying Huang (1989).“Price Correlation and Granger Causality Tests for Market Definition”.Review of Industrial Organization, 4(2); 79-98.

Church, Jeffrey and Roger Ware (2000). “Industrial Organization: A Strategic Approach”. McGraw Hill.

Coe, Patrick J. and David Krause (2008). “An Analysis of Price-based Test of Antitrust Market Delineation”. Journal of Competition Law and Economics, 4(4); 983-1007.

Copenhagen Economics (2003). “The internal market and the relevant geographical market: The impact of the completion of the Single Market Programme on the definition of the relevant geographical market”. UE Commission, DG Enterprise, Working Paper 15.

Eberwin, Curtis and Ted To (2004). “Simple Dynamic Oligopoly”, mimeo.

Enders, Walter (2004). Applied Econometric Time Series, 2 nd Edition, Willey.

Engle, Robert F. and Clive W. Granger (1987). “Co-Integration and Error Correction: Representation, Estimation and Testing”. Econometrica, 55(2);251-76.

Forni, Mario (2004). “Using Stationarity Test in Antitrust Market Definition”. American Law and Economic Review, 6(2); 441-64.

Froeb, Luke M. and Gregory J. Werden (1993). “Correlation, Causality and all that Jazz: The Inherent Shortcomings of Price Test for Antitrust Market Delineation”. Review of Industrial Organization, 8(2); 329-53.

Geroski, Paul A. and Rachel Griffith (2003). “Identifying anti-trust markets”. Institute for Fiscal Studies Working Paper W03/01.

Gonzalo, Jesus (1994). “Five alternative methods of estimating long-run equilibrium relationships”. Journal of Econometrics, 60(1-2); 203-33.

Granger, Clive W. and Paul Newbold (1974). “Spurious Regressions in Econometrics”. Journal of Econometrics, 2; 111-20.

Haldrup, Neils (2003). “Empirical Analysis of Price Data in the Delineation of the Relevant Geographical Market in Competition Analysis”. University of Aarhus, Economic Working Paper 2003-09.

Haldrup, Neils, Peter Møllgaard and Claus Kastberg Nielsen (2008). “Sequential Versus Simultaneous Market Delineation: the Relevant Antitrust Market for Salmon”. Journal of Competition Law and Economics, 4; 893-913.

Hosken, Daniel and Christopher T. Taylor (2004). “Discussion of 'Using Stationarity Test in Antitrust Market Definition'”. American Law and Economic Review, 6(2); 465-75.

Lütkepohl, Helmut (2005). “New Introduction to Multiple Time Series Analysis”. Springer.

Melgar, Natalia and Laura Rovegno (2004). “La Defensa de la Competencia en Uruguay: un debate necesario”. Tesis de grado, Facultad de Ciencias Económicas y Administración.

Motta, Massimo (2004). “Competition Policy: Theory and Practice”. Cambridge University Press.

Sherwin, Robert A. (1993). “Comments on Werden and Froeb – Correlation,Causality and all that Jazz”. Review of Industrial Organization, 8(2); 355-58.

Shroeder, Ted C. (1997). “Fed Cattle Spatial Transactions Price Relationships”. Journal of Agricultural and Applied Economics, 29; 347-62.

Shy, Oz (1996). “Industrial Organization: Theory and Practice”. The MIT Press.

Singh, Nirvikar y Xavier Vives (1984). “Price and Quantity Competition in Differentiated Duopoly”. The RAND Journal of Economics, 15(4); 546-54.

Slade, Margaret E. (1986). “Exogeneity Test of Market Boundaries Applied to Petroleum Products”. The Journal of Industrial Economics, XXXIV(3); 291-303.

Stigler, George J. and Robert A. Sherwin (1985). “The Extent of the Market”. Journal of Law and Economics, 28(3); 555-85.

Werden, Gregory (2000). “Market Delineation under the Merger Guidelines: Monopoly Cases and Alternative Approaches”. Review of Industrial Organization, 16(2); 211-28.

White, Lawrence (2005). “Market Definition in Monopoly Cases: A Paradigm is Missing”. New York University, Leonard Stern School of Business,Department of Economic Working Paper.