A Practical Guide to the Hypothetical Monopolist Test for Market Definition

Posted: 31 Dec 2008

See all articles by Malcolm B. Coate

Malcolm B. Coate

U.S. Federal Trade Commission (FTC)

Jeffrey H. Fischer

U.S. Federal Trade Commission (FTC)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2008

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

Coate, Malcolm B. and Fischer, Jeffrey H., A Practical Guide to the Hypothetical Monopolist Test for Market Definition (December 2008). Journal of Competition Law and Economics, Vol. 4, No. 4, pp. 1031-1063, 2008, Available at SSRN: https://ssrn.com/abstract=1318124 or http://dx.doi.org/nhn007

Malcolm B. Coate (Contact Author)

U.S. Federal Trade Commission (FTC) ( email )

601 Pennsylvania Avenue, NW
Washington, DC 20580
United States

Jeffrey H. Fischer

U.S. Federal Trade Commission (FTC) ( email )

600 Pennsylvania Ave., NW
Washington, DC 20580
United States
202-326-2656 (Phone)
202-326-2625 (Fax)

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