Using Stationarity Tests in Antitrust Market Definition
20 Pages Posted: 28 Mar 2002
Date Written: February 2002
In this Paper it is argued that, if two products or geographic areas belong in the same market, their relative price must be stationary. Hence stationarity tests like the ADF and the KPSS can be helpful in delineating the relevant market for Antitrust purposes, particularly for abuses of dominant positions and agreements between competitors. The proposed procedure is closely related with cointegration analysis but has more general validity. An application to the Italian milk market illustrates the technique.
Keywords: Anti-trust market definition, merger guidelines, stationarity, Dickey-Fuller test, KPSS test
JEL Classification: L41
Suggested Citation: Suggested Citation