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Market Definition with Differentiated Products: A Spatial Competition Application

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Author Info

  • Javier Elizalde

    ()
    (Universidad de Navarra)

Abstract

This paper applies the ‘hypothetical monopolist’ test of market definition to a retail market with products differentiated by means of location and other dimensions. The test for defining the relevant product and geographic market follows the conditions required by the European Union Competition Law and so it takes into account both demand- and supply-side substitution. The empirical model using sales data from a set of movie theatres in the North of Spain, incorporating the observed locations of consumers vis-à-vis the stores, shows that empirical tests of market definition may lead to an implausible definition of the relevant market if supply-side substitution is not accounted for.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random4d35501bb6886/1299002099_WP_UNAV_07_11.pdf
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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 07/11.

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Length: 49 pages
Date of creation: 16 Feb 2011
Date of revision:
Handle: RePEc:una:unccee:wp0711

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Web page: http://www.unav.es/facultad/econom

Related research

Keywords: Market definition; Spatial competition; Horizontal product differentiation; Supply-side substitution;

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References

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  1. Feenstra, Robert C & Levinsohn, James A, 1995. "Estimating Markups and Market Conduct with Multidimensional Product Attributes," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 19-52, January.
  2. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
  3. Steffen Brenner, 2005. "Hotelling Games with Three, Four, and More Players," Journal of Regional Science, Wiley Blackwell, vol. 45(4), pages 851-864.
  4. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
  5. repec:rje:randje:v:37:y:2006:i:4:p:964-982 is not listed on IDEAS
  6. Robert Ekelund & George Ford & John Jackson, 1999. "Is Radio Advertising a Distinct Local Market? An Empirical Analysis," Review of Industrial Organization, Springer, vol. 14(3), pages 239-256, May.
  7. Margaret E. SLADE, 2005. "The Role of Economic Space in Decision Making," Annales d'Economie et de Statistique, ENSAE, issue 77, pages 1-20.
  8. 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.
  9. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  10. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
  11. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
  12. Argentesi, Elena & Ivaldi, Marc, 2005. "Market Definition in Printed Media Industry: Theory and Practice," IDEI Working Papers 376, Institut d'Économie Industrielle (IDEI), Toulouse.
  13. Javier Elizalde, 2012. "A theoretical approach to market definition analysis," European Journal of Law and Economics, Springer, vol. 34(3), pages 449-475, December.
  14. 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, vol. 30(1), pages 123-47, April.
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Cited by:
  1. Javier Elizalde, 2012. "A theoretical approach to market definition analysis," European Journal of Law and Economics, Springer, vol. 34(3), pages 449-475, December.

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