Spatial Price Theory and Market Delineation

M. L. Greenhut has long maintained that ‘One policy area which not only lends itself to [spatial price] theory, but actually requires consideration of spatial relationships is that of antitrust’ (Greenhut and Benson, 1989, p. 3). Market delineation is a fundamental issue in antitrust practice (Marcus, 1980, p. 294) which cannot be fully appreciated without direct application of spatial price theory (Greenhut and Benson, 1989, p. 3).1 This is a required first step in the application of the US Clayton Act merger section, in Sherman Act monopoly cases, and under Canada’s Competition Act, where market share and market concentration data are offered as evidence of market power. Thus, a large literature has developed on the subject of market delineation (surprisingly little of it draws from spatial price theory, however, the exceptions being Benson, 1980; Greenhut and Benson, 1989; Benson and Faminow, 1990; and Benson et al., 1991)2 Indeed, a distinction between the ‘economic market’ and the ‘antitrust market’ has been drawn (Scheffman and Spiller, 1987). The economic market in which a firm operates encompasses all of the supply and demand forces that influence that firm’s price, while an antitrust market presumably consists of a ‘group of producers and geographic area, that could, if cartelized, profitably exercise market power’ (Scheffman and Spiller, 1987, p. 126).