Beyond Critical Loss: Tailoring Applications of the Hypothetical Monopolist Paradigm

Werden, Gregory J.

doi:10.2139/ssrn.327281

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Beyond Critical Loss: Tailoring Applications of the Hypothetical Monopolist Paradigm

US DOJ Antitrust Division Economic Analysis Group Discussion Paper No. 02-9

11 Pages Posted: 15 Oct 2002

See all articles by Gregory J. Werden

Gregory J. Werden

Independent; George Mason University - Mercatus Center

Date Written: July 22, 2002

Abstract

"Critical elasticity of demand" and "critical loss" analysis are now standard analytical tools for implementing the hypothetical monopolist paradigm for market delineation. Although these tools are highly useful, this paper presents three scenarios in which their standard application can be highly misleading and explains how the hypothetical monopolist paradigm can be fully and faithfully implemented in those scenarios. Only a tailored application of the hypothetical monopolist paradigm meets the rigorous admissibility tests applied by the courts since the Supreme Court's decision in Daubert.

Keywords: Antitrust, Market Delineation, Mergers

JEL Classification: L41

Suggested Citation: Suggested Citation

Werden, Gregory J., Beyond Critical Loss: Tailoring Applications of the Hypothetical Monopolist Paradigm (July 22, 2002). US DOJ Antitrust Division Economic Analysis Group Discussion Paper No. 02-9, Available at SSRN: https://ssrn.com/abstract=327281 or http://dx.doi.org/10.2139/ssrn.327281