The SSNIP Test and Market Definition with the Aggregate Diversion Ratio: A Reply to Katz and Shapiro

Posted: 17 Jun 2008

See all articles by Øystein Daljord

Øystein Daljord

University of Chicago, Booth School of Business

Lars Sørgard

Norwegian Competition Authority

Øyvind Thomassen

KU Leuven - Center for Economic Studies

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.

Keywords: K21, L1, L11, L12

Suggested Citation

Daljord, Øystein and Sørgard, Lars and Thomassen, Øyvind, The SSNIP Test and Market Definition with the Aggregate Diversion Ratio: A Reply to Katz and Shapiro. Journal of Competition Law and Economics, Vol. 4, Issue 2, pp. 263-270, 2008, Available at SSRN: https://ssrn.com/abstract=1146717 or http://dx.doi.org/nhm032

Øystein Daljord (Contact Author)

University of Chicago, Booth School of Business ( email )

Chicago, IL 60637
United States
7738342146 (Phone)

HOME PAGE: http://faculty.chicagobooth.edu/oystein.daljord/index.html

Lars Sørgard

Norwegian Competition Authority ( email )

P.O. Box 439 Sentrum
NO- 5805 Bergen
Norway

HOME PAGE: http://www.kt.no/internett/index.asp?startID=& topExpand=&subExpand=&LanguageCode=9&strUrl=1003067i

Øyvind Thomassen

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,451
PlumX Metrics