Market Definition with Shock Analysis
22 Pages Posted: 11 Feb 2010
Date Written: December 4, 2007
The SSNIP test for market definition requires information about demand substitution and profitability. If detailed information about demand is not available, observed effects of a shock in the industry may be an alternative source of evidence. In the existing literature, shock analysis has unfortunately not been clearly linked to the SSNIP test. The lack of a rigorous framework may confuse the interpretation of the effects of shocks. We illustrate how a shock can be evaluated within the SSNIP framework with a minimum of data. We apply our criterion to a capacity expansion in the ferry market in the North Sea.
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