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Implementing Relevant Market Tests in Antitrust Policy: Application to Computer Servers

Author

Listed:
  • Ivaldi Marc

    (Toulouse School of Economics)

  • Lőrincz Szabolcs

    (European Commission, Directorate-General Competition)

Abstract

The paper defines, implements and compares two empirical tests of relevant markets. While the SSNIP test compares an initial industry equilibrium to an out-of-equilibrium situation, the 1984 US Merger Guidelines test compares the same initial equilibrium to a second equilibrium outcome. We define these concepts formally and apply them to the computer server industry by estimating a model on a large dataset. We find several smaller relevant markets in the low-end segment of servers. In addition, we find that the results might be quantitatively significantly different between the two approaches as the SSNIP test changes prices uniformly and does not take into account the multi-product pricing strategies of the firms.

Suggested Citation

  • Ivaldi Marc & Lőrincz Szabolcs, 2011. "Implementing Relevant Market Tests in Antitrust Policy: Application to Computer Servers," Review of Law & Economics, De Gruyter, vol. 7(1), pages 29-71, April.
    • Handle: RePEc:bpj:rlecon:v:7:y:2011:i:1:n:3
    DOI: 10.2202/1555-5879.1248
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    References listed on IDEAS

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    1. Van Reenen, John, 2004. "Is there a market for work group servers? Evaluating market level demand elasticities using micro and macro models," LSE Research Online Documents on Economics 773, London School of Economics and Political Science, LSE Library.
    2. 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.
    3. Igal Hendel, 1999. "Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(2), pages 423-446.
    4. Ivaldi, Marc & Verboven, Frank, 2005. "Quantifying the effects from horizontal mergers in European competition policy," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 669-691, December.
    5. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    6. Cardell, N. Scott, 1997. "Variance Components Structures for the Extreme-Value and Logistic Distributions with Application to Models of Heterogeneity," Econometric Theory, Cambridge University Press, vol. 13(2), pages 185-213, April.
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    Citations

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    Cited by:

    1. Polk, Andreas & Bilotkach, Volodymyr, 2013. "The assessment of market power of hub airports," Transport Policy, Elsevier, vol. 29(C), pages 29-37.
    2. Kohei Kawaguchi & Toshifumi Kuroda & Susumu Sato, 2021. "Merger Analysis in the App Economy: An Empirical Model of Ad-Sponsored Media," HKUST CEP Working Papers Series 202103, HKUST Center for Economic Policy.
    3. Christos Genakos & Kai‐Uwe Kühn & John Van Reenen, 2018. "Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets," Economica, London School of Economics and Political Science, vol. 85(340), pages 873-902, October.
    4. Jordi Perdiguero & Joan Ramon Borrell, 2019. "Driving competition in local markets with near-perfect substitutes: an application on the Spanish retail gasoline market," Empirical Economics, Springer, vol. 57(1), pages 345-364, July.
    5. Lapo Filistrucchi, 2008. "A SSNIP test for two-sided markets: the case of media," Working Papers 08-34, NET Institute, revised Oct 2008.
    6. Siotis, Georges & Ornaghi, Carmine & Castanheira, Micael, 2019. "Market Definition and Competition Policy Enforcement in the Pharmaceutical Industry," CEPR Discussion Papers 14035, C.E.P.R. Discussion Papers.
    7. Georges Siotis & Carmine Ornaghi & Micael Castanheira, 2023. "Evolving market boundaries and competition policy enforcement in the pharmaceutical industry," European Journal of Law and Economics, Springer, vol. 55(2), pages 313-348, April.
    8. Filistrucchi, L. & Gerardin, D. & van Damme, E.E.C. & Keunen, S. & Klein, T.J. & Michielsen, T.O. & Wileur, J., 2010. "Mergers in Two-Sided Markets - A Report to the NMa," Other publications TiSEM f901d1fe-8878-444e-a685-8, Tilburg University, School of Economics and Management.
    9. Kawaguchi, Kohei & Kuroda, Toshifumi & Sato, Susumu, 2023. "Relevant markets and market power of mobile apps," Japan and the World Economy, Elsevier, vol. 67(C).
    10. Martin S. Gaynor & Samuel A. Kleiner & William B. Vogt, 2013. "A Structural Approach to Market Definition With an Application to the Hospital Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 243-289, June.
    11. Pereira, Pedro & Vareda, João, 2013. "How will telecommunications bundles impact competition and regulatory analysis?," Telecommunications Policy, Elsevier, vol. 37(6), pages 530-539.

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