Market Definition with Differentiated Products - Lessons from the Car Market
AbstractFor a variety of reasons, it is likely that the market definition approach will remain an important tool in competition policy analysis for some time, despite the increased importance of other tools such as the simulation approach. Against the background of the new block exemption regulation for cars in Europe, we explore an econometric approach to define the relevant markets with differentiated products. On the one hand, the approach is directly consistent with the SSNIP-test, and it is in fact more satisfactory than previous approaches, such as critical elasticity analysis or the simple use of standard industry classifications. On the other hand, the approach shares a lot of features with the simulation approach (similar data requirements, and similar assumptions about current market power). We find that the relevant market for minivan cars is defined at the widest level, i.e. at the aggregate country level. Furthermore, in Italy the relevant markets for domestic cars are defined at an intermediate level, i.e. at the segment level. In all other cases, the relevant markets for cars may be defined at the narrowest level, i.e. at the subsegment level. Based on these results, we identify the firms that may violate the market share thresholds stipulated in the block exemption regulation. We find that, if we would have used an approach based on standard industry classifications instead of our econometric approach, our conclusions would have been different and, in fact, inconclusive. We also draw attention to other issues in market definition that may be of use to practitioners.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5249.
Date of creation: Sep 2005
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- L4 - Industrial Organization - - Antitrust Issues and Policies
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-29 (All new papers)
- NEP-COM-2005-09-29 (Industrial Competition)
- NEP-MIC-2005-09-29 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goldberg, P & Verboven, Frank, 2001.
"Market integration and convergence to the law of one price : evidence from the European car market,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/224071, Katholieke Universiteit Leuven.
- Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
- Pinelopi K. Goldberg & Frank Verboven, 2001. "Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market," NBER Working Papers 8402, National Bureau of Economic Research, Inc.
- Goldberg, PK & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/99322, Katholieke Universiteit Leuven.
- Goldberg, Pinelopi & Verboven, Frank, 2001. "Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market," CEPR Discussion Papers 2926, C.E.P.R. Discussion Papers.
- Verboven, Frank, 1996.
"International price discrimination in the European car market,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/101467, Katholieke Universiteit Leuven.
- Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
- Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Ivaldi, Marc & Lörincz, Szabolcs, 2005.
"A Full Equilibrium Relevant Market Test: Application to Computer Servers,"
IDEI Working Papers
341, Institut d'Économie Industrielle (IDEI), Toulouse.
- Ivaldi, Marc & Lörincz, Szabolcs, 2005. "A Full Equilibrium Relevant Market Test: Application to Computer Servers," CEPR Discussion Papers 4917, C.E.P.R. Discussion Papers.
- Lidia Mannarino, 2009. "Il Mercato Delle Automobili In Italia: Effetti Del Regolamento Cee 1400/2002," Working Papers 200913, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.