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Using Stationarity Tests in Antitrust Market Definition

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  • Forni, Mario

Abstract

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3236.

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Date of creation: Feb 2002
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Handle: RePEc:cpr:ceprdp:3236

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Keywords: anti-trust market definition; dickey-Fuller test; kpss test; merger guidelines; stationarity;

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References

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  1. George J. Stigler & Robert A. Sherwin, 1983. "The Extent of the Market," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 31, Chicago - Center for Study of Economy and State.
  2. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 979, Cowles Foundation for Research in Economics, Yale University.
  3. Croux, Christophe & Forni, Mario & Reichlin, Lucrezia, 1999. "A Measure of Comovement for Economic Variables: Theory and Empirics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2339, C.E.P.R. Discussion Papers.
  4. Uri, Noel D & Rifkin, Edward J, 1985. "Geographic Markets, Causality and Railroad Deregulation," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 422-28, August.
  5. Slade, Margaret E, 1986. "Exogeneity Tests of Market Boundaries Applied to Petroleum Products," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 291-303, March.
  6. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 6(3), pages 283-300.
  7. Froeb, L.M. & Werden, G.J., 1991. "Correlation, Causality, and all that Jazz: The Inherent Shortcomings of Price Tests for Antitrust Market Delineation," Papers, U.S. Department of Justice - Antitrust Division 91-6, U.S. Department of Justice - Antitrust Division.
  8. Scheffman, David T & Spiller, Pablo T, 1987. "Geographic Market Definition under the U.S. Department of Justice Merger Guidelines," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 30(1), pages 123-47, April.
  9. Gregory Werden, 2000. "Market Delineation under the Merger Guidelines: Monopoly Cases and Alternative Approaches," Review of Industrial Organization, Springer, Springer, vol. 16(2), pages 211-218, March.
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Citations

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Cited by:
  1. Javier Elizalde, 2012. "A theoretical approach to market definition analysis," European Journal of Law and Economics, Springer, Springer, vol. 34(3), pages 449-475, December.
  2. Willem Boshoff, 2006. "Quantitative competition analysis: Stationarity tests in geographic market definition," Working Papers 17/2006, Stellenbosch University, Department of Economics.
  3. Fiuza, Eduardo P.S. & Tito, Fabiana F.M., 2010. "Post-merger time series analysis: Iron ore mining," Resources Policy, Elsevier, Elsevier, vol. 35(3), pages 141-155, September.
  4. Hans L. van Kranenburg, 2005. "Relevant Market and Pricing Behavior of Regional Newspapers in the Netherlands," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 74(3), pages 73-84.
  5. Zipitria, Leandro, 2010. "New Directions in Price Test for Market Definition," MPRA Paper 58046, University Library of Munich, Germany.
  6. Haldrup, Niels, . "Empirical analysis of price data in the delineation of the relevant geographical market in competition analysis," Economics Working Papers, School of Economics and Management, University of Aarhus 2003-9, School of Economics and Management, University of Aarhus.
  7. Sonali Das & Rangan Gupta & Patrick Agu Kaya, 2009. "Convergence of Metropolitan House Prices in South Africa: A Re-Examination Using Efficient Unit Root Tests," Working Papers 200922, University of Pretoria, Department of Economics.
  8. Paul Geroski & Rachel Griffith, 2003. "Identifying anti-trust markets," IFS Working Papers, Institute for Fiscal Studies W03/01, Institute for Fiscal Studies.
  9. Juselius , Mikael & Kim, Moshe & Ringbom, Staffan, 2009. "Do markup dynamics reflect fundamentals or changes in conduct?," Research Discussion Papers 12/2009, Bank of Finland.
  10. Scalco, Paulo Roberto & Braga, Marcelo Jose, 2014. "Measuring the Degree of Oligoposony Power in the Brazilian Raw Milk Market," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), International Food and Agribusiness Management Association (IAMA), vol. 17(2).
  11. Dennis Sánchez-Navarro, 2012. "Una propuesta metodológica para la definición de mercados geográficos relevantes," ESTUDIOS ECONÓMICOS SIC 010492, SUPERINTENDENCIA DE INDUSTRIA Y COMERCIO.
  12. James F. Nieberding, 2006. "Estimating overcharges in antitrust cases using a reduced-form approach: Methods and issues," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 361-380, November.

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