Market Definition: An Analytical Overview
45 Pages Posted: 26 Nov 2005 Last revised: 30 Apr 2013
Date Written: November 1, 2006
This essay surveys important issues in antitrust market definition. It identifies settings in which market definition is useful, and evaluates methods of defining markets. It considers whether markets should be defined with respect to demand substitution only or whether supply substitution also should count. It addresses practical issues in defining markets, including the probative value of various types of evidence, how much buyer substitution is too much, application of the market definition algorithm of the Horizontal Merger Guidelines, the Cellophane fallacy, and the advantages and disadvantages of defining submarkets. It also evaluates several controversial approaches to market definition, including price correlations, shipment flows, critical loss analysis, and cluster markets.
Keywords: market definition, antitrust
JEL Classification: L4
Suggested Citation: Suggested Citation