Antitrust Market Definition and Taxes

9 Pages Posted: 24 Oct 2010

See all articles by Fernando H. Navajas

Fernando H. Navajas

Fundacion de Investigaciones Economicas Latinoamericanas (FIEL); Universidad de Buenos Aires; Universidad Nacional de La Plata

Santiago Urbiztondo

National University of La Plata and FIEL, Argentin

Date Written: September 22, 2010

Abstract

This paper considers the effect of taxes on the definition of relevant markets in antitrust analysis by examining various measures used within the hypothetical monopoly test. We show that the use of net margins (between producer prices and marginal cost) is a proper correction, but that it is only sufficient in the absence of specific unit taxes. When the latter exist, the price-elasticity of net demand is lower than the estimated price-elasticity based on market prices, and the use of net margins is insufficient to avoid biased conclusions.

Keywords: Market definition, critical measures, taxes

JEL Classification: K21, L40

Suggested Citation

Navajas, Fernando and Urbiztondo, Santiago, Antitrust Market Definition and Taxes (September 22, 2010). Available at SSRN: https://ssrn.com/abstract=1696134 or http://dx.doi.org/10.2139/ssrn.1696134

Fernando Navajas (Contact Author)

Fundacion de Investigaciones Economicas Latinoamericanas (FIEL) ( email )

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Universidad de Buenos Aires ( email )

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Universidad Nacional de La Plata

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Buenos Aires, BA 1900
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Santiago Urbiztondo

National University of La Plata and FIEL, Argentin ( email )

Av. Cordoba 637
Buenos Aires
Argentina
(54-1) 314-1990 (Phone)
(54-1) 314-8648 (Fax)

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