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The Ssnip Test And Market Definition With The Aggregate Diversion Ratio: A Reply To Katz And Shapiro

Author

Listed:
  • Øystein Daljord
  • Lars Sørgard
  • Øyvind Thomassen

Abstract

The Hypothetical Monopolist or Small but Significant Non-transitory Increase in Prices (SSNIP) test defines the relevant market by determining whether a given increase in product prices would be profitable for a monopolist in the candidate market. The U.S. Merger Guidelines do not specify whether the SSNIP test should be performed with an increase in one price, some prices, or all prices in the candidate market. We argue that this should depend on characteristics of the market: if there are asymmetries between products, increasing only one price might be the best way to identify competitive constraints. Katz and Shapiro derive a one-price test criterion of critical loss in terms of the aggregate diversion ratio. Unfortunately, the derivation is incorrect. We show what the correct criterion should be.

Suggested Citation

  • Øystein Daljord & Lars Sørgard & Øyvind Thomassen, 2008. "The Ssnip Test And Market Definition With The Aggregate Diversion Ratio: A Reply To Katz And Shapiro," Journal of Competition Law and Economics, Oxford University Press, vol. 4(2), pages 263-270.
    • Handle: RePEc:oup:jcomle:v:4:y:2008:i:2:p:263-270.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhm032
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    Citations

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    Cited by:

    1. Sergio Aquino de Souza & Eduardo Pontual Ribeiro & Gerson Carvalho, 2010. "Documento de Trabalho 01/2010 - Delimitação de Mercado Relevante," Documentos de Trabalho 2010010, Conselho Administrativo de Defesa Econômica (Cade), Departamento de Estudos Econômicos.
    2. Daljord, Øystein & Sørgard, Lars, 2011. "Single-product versus uniform SSNIPs," International Review of Law and Economics, Elsevier, vol. 31(2), pages 142-146, June.
    3. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2021. "Vertical relations, pass-through, and market definition: Evidence from grocery retailing," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    4. Sergio Aquino de Souza & Eduardo Pontual Ribeiro & Gerson Carvalho, 2010. "Documento de Trabalho 01/2010 - Delimitação de Mercado Relevante," Documentos de Trabalho 12010, Conselho Administrativo de Defesa Econômica (Cade), Departamento de Estudos Econômicos.
    5. Øystein Daljord, 2009. "An Exact Arithmetic Ssnip Test For Asymmetric Products," Journal of Competition Law and Economics, Oxford University Press, vol. 5(3), pages 563-569.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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