A SSNIP test for two-sided markets: the case of media
AbstractI discuss the design and implementation of a SSNIP test in order to identify the relevant market in a media market. I argue that in such a two-sided market the traditional SSNIP test cannot be applied as it is usually conceived but rather should be modified in order to take into account indirect network externalities. I discuss the issues of which price the hypothetical monopolist should be thought of as raising, of whether we should look at profits changes on only one side or on both sides of the market and of which feedback among the two sides of the market we should take into account. I then derive the relevant formulas for Critical Loss Analysis. These look much uglier than in a single-sided market but in fact they are easy to calculate as they are still expressed in terms of elasticities and of current observed markups, prices and quantities. Data requirements are however higher as one needs to estimate the matrixes of the own and cross price elasticities of demand on the two-sides of the market and the matrixes of the network effects. The paper fills a gap in the economic literature, so much more as market definition in media markets is at the centre of many recent competition policy and regulation cases around the world.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 08-34.
Length: 45 pages
Date of creation: Oct 2008
Date of revision: Oct 2008
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two-sided markets; SSNIP test; Hypothetical Monopolist test; critical loss analysis; critical elasticity analysis; market definition; media;
Find related papers by JEL classification:
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- K20 - Law and Economics - - Regulation and Business Law - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-04 (All new papers)
- NEP-COM-2008-11-04 (Industrial Competition)
- NEP-CUL-2008-11-04 (Cultural Economics)
- NEP-IND-2008-11-04 (Industrial Organization)
- NEP-LAW-2008-11-04 (Law & Economics)
- NEP-MIC-2008-11-04 (Microeconomics)
- NEP-MKT-2008-11-04 (Marketing)
- NEP-NET-2008-11-04 (Network Economics)
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