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A Practical Guide To The Hypothetical Monopolist Test For Market Definition
[Market Definition: An Analytical Overview]

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  • Malcolm B. Coate
  • Jeffrey H. Fischer

Abstract

The hypothetical monopolist test has been used to define antitrust markets for over 20 years. However, many of these applications occur within the enforcement agencies and thus the implementation process is not fully transparent to antitrust practitioners. This paper provides a study of 116 market definition decisions from the Federal Trade Commission's archives. We find that the agency rarely has trouble defining both product and geographic markets; in fact, the demand-side market definition process is relatively simple in over half of the cases reviewed. In many of the remaining matters, critical loss, analysis of natural experiments, and various studies of data patterns are undertaken to identify the relevant market. These studies show a remarkable variety in data requirements, sophistication, and analytical technique. Supply-side considerations affect a few markets and price discrimination supports more focused analysis in about 10 cases.

Suggested Citation

  • Malcolm B. Coate & Jeffrey H. Fischer, 2008. "A Practical Guide To The Hypothetical Monopolist Test For Market Definition [Market Definition: An Analytical Overview]," Journal of Competition Law and Economics, Oxford University Press, vol. 4(4), pages 1031-1063.
    • Handle: RePEc:oup:jcomle:v:4:y:2008:i:4:p:1031-1063.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhn007
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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. Russell Pittman, 2009. "Competition Issues in Restructuring Ports and Railways, Including Brief Consideration of these Sectors in India," EAG Discussions Papers 200906, Department of Justice, Antitrust Division.
    3. Malcolm Coate & Shawn Ulrick, 2009. "Do Court Decisions Drive the Federal Trade Commission’s Enforcement Policy on Merger Settlements?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(2), pages 99-114, March.
    4. Prado, Tiago S., 2021. "Assessing the Market Power of Digital Platforms," 23rd ITS Biennial Conference, Online Conference / Gothenburg 2021. Digital societies and industrial transformations: Policies, markets, and technologies in a post-Covid world 238048, International Telecommunications Society (ITS).
    5. Willem H. Boshoff, 2011. "Antitrust market definition using statistical learning techniques and consumer characteristics," Working Papers 224, Economic Research Southern Africa.
    6. 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.
    7. 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.
    8. Coate Malcolm B., 2008. "Theory Meets Practice: Barriers to Entry in Merger Analysis," Review of Law & Economics, De Gruyter, vol. 4(1), pages 183-212, June.
    9. Willem H. Boshoff, 2013. "Why define markets in competition cases?," Working Papers 10/2013, Stellenbosch University, Department of Economics.
    10. Coate, Malcolm B. & Ulrick, Shawn W. & Yun, John M., 2021. "Tailoring critical loss to the competitive process," International Review of Law and Economics, Elsevier, vol. 65(C).
    11. Samuel Vika Mhlanga & Neil Andrew Rankin, 2021. "Fixed costs, markups and concentration in Eswatini (Swaziland): A firm‐level analysis of panel data," South African Journal of Economics, Economic Society of South Africa, vol. 89(3), pages 391-416, September.

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