Recapture, Pass-Through, and Market Definition

20 Pages Posted: 16 May 2010  

Joseph Farrell

University of California, Berkeley - Department of Economics

Carl Shapiro

University of California, Berkeley - Haas School of Business

Abstract

We describe how the hypothetical monopolist test used to define relevant markets in horizontal merger cases can be implemented using the fundamental economic concepts of opportunity cost and pass-through. Unlike critical loss analysis, our approach analyzes the behavior of a profit-maximizing hypothetical monopolist, as called for in the 1992 Horizontal Merger Guidelines. This approach also can provide a consistency check between relevant markets defined using the hypothetical monopolist test and claims regarding the pass-through of merger-specific efficiencies.

Suggested Citation

Farrell, Joseph and Shapiro, Carl, Recapture, Pass-Through, and Market Definition. Antitrust Law Journal, Vol. 76, No. 3, pp. 585-604, 2010. Available at SSRN: https://ssrn.com/abstract=1608428

Joseph Farrell

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-9854 (Phone)
510-642-6615 (Fax)

Carl Shapiro (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-5905 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu

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