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Market Definition: Use and Abuse

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Author Info

  • Dennis W. Carlton

    (Economic Analysis Group, Antitrust Division, Department of Justice)

Abstract

A “market” can be rigorously and precisely defined quantitatively, but the information to do so is typically not available. Instead, markets are often defined based on qualitative information, leading to the possibility of errors. I make some practical suggestions to mitigate such errors. When markets are correctly defined, it is the change in market shares that is central to the antitrust analysis, though this is not how courts typically use market definition and shares to analyze Section 2 cases. Unfortunately, there is only a weak link between change in market share and change in competitive performance, and that is why market definition and the use of market shares are very crude tools of analysis. That is why their best use is as safe harbors to quickly screen out frivolous cases from those where the economic forces governing industry behavior need to be carefully studied. But, I explain why even this use of market definition and market shares can be problematic in Section 2 cases.

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File URL: http://www.justice.gov/atr/public/eag/225693.pdf
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Bibliographic Info

Paper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 200706.

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Length: 36 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:doj:eagpap:200706

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Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530
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Web page: http://www.justice.gov/atr/
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References

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  1. David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
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Cited by:
  1. John Lopatka, 2011. "Market Definition?," Review of Industrial Organization, Springer, vol. 39(1), pages 69-93, August.
  2. Evans, David S. & Noel, Michael D., 2007. "Defining Markets That Involve Multi-Sided Platform Businesses: An Empirical Framework With an Application to Google's Purchase of DoubleClick," Working paper 551, Regulation2point0.
  3. Hongjai Rhee & Minsoo Park, 2011. "Fixed-to-mobile call substitution and telephony market definition in Korea," Journal of Regulatory Economics, Springer, vol. 40(2), pages 198-218, October.
  4. Dennis Carlton & Ken Heyer, 2007. "The Year in Review: Economics at the Antitrust Division, 2006–2007," Review of Industrial Organization, Springer, vol. 31(2), pages 121-137, September.
  5. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," EAG Discussions Papers 200703, Department of Justice, Antitrust Division.

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