Beyond Critical Loss: Tailoring Applications of the Hypothetical Monopolist Paradigm

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