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Quantitative competition analysis: Stationarity tests in geographic market definition

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  • Willem Boshoff

    ()
    (Department of Economics, University of Stellenbosch)

Abstract

The paper focuses on the delineation of geographic markets in competition analysis, investigating the use of both quantitative and qualitative evaluation in the market definition exercise. To this end, the first part is devoted to a conceptual framework for market definition (adopted from Haldrup (2003)). Thereafter, a variety of price tests are explored that can be applied within the quantitative part of the framework. Similar to Forni (2004), the paper emphasizes the use of stationarity tests (that is, tests for the existence of unit roots) – illustrating their application to a recent competition investigation in South Africa.

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File URL: http://www.ekon.sun.ac.za/wpapers/2006/wp172006/wp-17-2006.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 17/2006.

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Date of creation: 2006
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Handle: RePEc:sza:wpaper:wpapers31

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Related research

Keywords: Market definition; Delineation; Quantitative; Stationarity tests; Prices; Geographic; SSNIP; Hypothetical monopolist; Competition; Unit root; Price ratio; Antitrust;

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References

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  1. Haldrup, Niels, . "Empirical analysis of price data in the delineation of the relevant geographical market in competition analysis," Economics Working Papers 2003-9, School of Economics and Management, University of Aarhus.
  2. 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 31, Chicago - Center for Study of Economy and State.
  3. Perron, Pierre & Ng, Serena, 1996. "Useful Modifications to Some Unit Root Tests with Dependent Errors and Their Local Asymptotic Properties," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 435-63, July.
  4. Geroski, P. A., 1998. "Thinking creatively about markets," International Journal of Industrial Organization, Elsevier, vol. 16(6), pages 677-695, November.
  5. Daniel Hosken & Christopher T. Taylor, 2004. "Discussion of "Using Stationarity Tests in Antitrust Market Definition"," American Law and Economics Review, Oxford University Press, vol. 6(2), pages 465-475.
  6. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  7. Nicola Theron, 2001. "The Economics Of Competition Policy: Merger Analysis In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(4), pages 614-658, December.
  8. David Genesove, 2004. "Comment on Forni's "Using Stationarity Tests in Antitrust Market Definition"," American Law and Economics Review, Oxford University Press, vol. 6(2), pages 476-478.
  9. Forni, Mario, 2002. "Using Stationarity Tests in Antitrust Market Definition," CEPR Discussion Papers 3236, C.E.P.R. Discussion Papers.
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