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Using Stationarity Tests in Antitrust Market Definition

  • Forni, Mario

In this Paper it is argued that, if two products or geographic areas belong in the same market, their relative price must be stationary. Hence stationarity tests like the ADF and the KPSS can be helpful in delineating the relevant market for Antitrust purposes, particularly for abuses of dominant positions and agreements between competitors. The proposed procedure is closely related with cointegration analysis but has more general validity. An application to the Italian milk market illustrates the technique.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3236.

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Date of creation: Feb 2002
Date of revision:
Handle: RePEc:cpr:ceprdp:3236
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  1. Christophe Croux & Mario Forni & Lucrezia Reichlin, 2001. "A measure of co-movement for economic variables: theory and empirics," ULB Institutional Repository 2013/10139, ULB -- Universite Libre de Bruxelles.
  2. 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.
  3. 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.
  4. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  5. Stigler, George J & Sherwin, Robert A, 1985. "The Extent of the Market," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 555-85, October.
  6. Uri, Noel D & Rifkin, Edward J, 1985. "Geographic Markets, Causality and Railroad Deregulation," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 422-28, August.
  7. Froeb, L.M. & Werden, G.J., 1991. "Correlation, Causality, and all that Jazz: The Inherent Shortcomings of Price Tests for Antitrust Market Delineation," Papers 91-6, U.S. Department of Justice - Antitrust Division.
  8. Gregory Werden, 2000. "Market Delineation under the Merger Guidelines: Monopoly Cases and Alternative Approaches," Review of Industrial Organization, Springer, vol. 16(2), pages 211-218, March.
  9. 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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