Antitrust Market Definition and Taxes
9 Pages Posted: 24 Oct 2010
Date Written: September 22, 2010
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: Suggested Citation