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Quantitative competition analysis: Stationarity tests in geographic market definition

Author

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  • Willem Boshoff

    (Department of Economics, University of Stellenbosch)

Abstract

The paper focuses on the delineation of geographic markets in competition analysis, investigating the use of both quantitative and qualitative evaluation in the market definition exercise. To this end, the first part is devoted to a conceptual framework for market definition (adopted from Haldrup (2003)). Thereafter, a variety of price tests are explored that can be applied within the quantitative part of the framework. Similar to Forni (2004), the paper emphasizes the use of stationarity tests (that is, tests for the existence of unit roots) – illustrating their application to a recent competition investigation in South Africa.

Suggested Citation

  • Willem Boshoff, 2006. "Quantitative competition analysis: Stationarity tests in geographic market definition," Working Papers 17/2006, Stellenbosch University, Department of Economics.
    • Handle: RePEc:sza:wpaper:wpapers31
    as

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    File URL: https://www.ekon.sun.ac.za/wpapers/2006/wp172006/wp-17-2006.pdf
    File Function: First version, 2006
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    References listed on IDEAS

    as
    1. Stigler, George J & Sherwin, Robert A, 1985. "The Extent of the Market," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 555-585, October.
      • Stigler, George J. & Sherwin, Robert A., 1983. "The Extent of the Market," Working Papers 31, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    2. Haldrup, Niels, "undated". "Empirical analysis of price data in the delineation of the relevant geographical market in competition analysis," Economics Working Papers 2003-9, Department of Economics and Business Economics, Aarhus University.
    3. Mario Forni, 2004. "Using Stationarity Tests in Antitrust Market Definition," American Law and Economics Review, American Law and Economics Association, vol. 6(2), pages 441-464.
    4. Pierre Perron & Serena Ng, 1996. "Useful Modifications to some Unit Root Tests with Dependent Errors and their Local Asymptotic Properties," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 435-463.
    5. Patrick Massey, 2000. "Market Definition and Market Power in Competition Analysis - Some Practical Issues," The Economic and Social Review, Economic and Social Studies, vol. 31(4), pages 309-328.
    6. Daniel Hosken & Christopher T. Taylor, 2004. "Discussion of "Using Stationarity Tests in Antitrust Market Definition"," American Law and Economics Review, American Law and Economics Association, vol. 6(2), pages 465-475.
    7. Geroski, P. A., 1998. "Thinking creatively about markets," International Journal of Industrial Organization, Elsevier, vol. 16(6), pages 677-695, November.
    8. David Genesove, 2004. "Comment on Forni's "Using Stationarity Tests in Antitrust Market Definition"," American Law and Economics Review, American Law and Economics Association, vol. 6(2), pages 476-478.
    9. Nicola Theron, 2001. "The Economics Of Competition Policy: Merger Analysis In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(4), pages 614-658, December.
    10. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Market definition; Delineation; Quantitative; Stationarity tests; Prices; Geographic; SSNIP; Hypothetical monopolist; Competition; Unit root; Price ratio; Antitrust;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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