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Resources and market definition: Rethinking the “hypothetical monopolist†from a resource†based perspective

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  • Guilherme Fowler A. Monteiro
  • Nicolai Foss

Abstract

We reassess the concept of the hypothetical monopolist as a device for relevant market definition. The hypothetical monopolist test (also known as the Small but Significant Non†transitory Increase in Price test) is a clever, intuitive way of thinking the relevant market in antitrust, and is gaining ground in strategic management. The test, however, implicitly disregards resource characteristics in relevant market delineation, focusing exclusively on demand side substitutability. In reassessing the hypothetical monopolist, we make 2 general contributions to the strategy literature. First, using cooperative game theory, we advance a precise resource†based definition of the hypothetical monopolist. Second, we demonstrate how this definition broadens our conventional understanding on 2 important topics: resource complementarities and disruptive innovations. In doing so, we complement and strengthen the hypothetical monopolist test as a device for management (strategic) and public policy (antitrust) analysis.

Suggested Citation

  • Guilherme Fowler A. Monteiro & Nicolai Foss, 2018. "Resources and market definition: Rethinking the “hypothetical monopolist†from a resource†based perspective," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 39(3), pages 346-353, April.
    • Handle: RePEc:wly:mgtdec:v:39:y:2018:i:3:p:346-353
    DOI: 10.1002/mde.2908
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