An Analysis of Price-Based Tests of Antitrust Market Delineation

Posted: 31 Dec 2008

See all articles by Patrick Coe

Patrick Coe

Carleton University - Department of Economics

David Krause

Bell Canada; Carleton University - Department of Economics

Date Written: December 2008

Abstract

There are well-known theoretical concerns regarding the use of price correlations to determine antitrust markets. However, this has not deterred their use or the application of Granger causality, stationarity, and cointegration tests in the determination of antitrust markets. In this paper, we explore the empirical performance of these various tests. In particular, we want to know whether these tests are capable of generating the correct inference both when two products are in the same relevant market and when they are not. Our results imply that, in the absence of common shocks, simple price correlations may be capable of providing reliable evidence on market delineation. However, in samples sizes similar to those currently available, the performance of other commonly employed price-based tests suggests that they provide little economically meaningful information to antitrust practitioners.

Suggested Citation

Coe, Patrick James and Krause, David Peter, An Analysis of Price-Based Tests of Antitrust Market Delineation (December 2008). Journal of Competition Law and Economics, Vol. 4, Issue 4, pp. 983-1007, 2008. Available at SSRN: https://ssrn.com/abstract=1318125 or http://dx.doi.org/nhn008

Patrick James Coe (Contact Author)

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

David Peter Krause

Bell Canada ( email )

613-785-6344 (Phone)

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

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