IDEAS home Printed from https://ideas.repec.org/p/doj/eagpap/200706.html
   My bibliography  Save this paper

Market Definition: Use and Abuse

Author

Listed:
  • Dennis W. Carlton

    (Economic Analysis Group, Antitrust Division, Department of Justice)

Abstract

A “market” can be rigorously and precisely defined quantitatively, but the information to do so is typically not available. Instead, markets are often defined based on qualitative information, leading to the possibility of errors. I make some practical suggestions to mitigate such errors. When markets are correctly defined, it is the change in market shares that is central to the antitrust analysis, though this is not how courts typically use market definition and shares to analyze Section 2 cases. Unfortunately, there is only a weak link between change in market share and change in competitive performance, and that is why market definition and the use of market shares are very crude tools of analysis. That is why their best use is as safe harbors to quickly screen out frivolous cases from those where the economic forces governing industry behavior need to be carefully studied. But, I explain why even this use of market definition and market shares can be problematic in Section 2 cases.

Suggested Citation

  • Dennis W. Carlton, 2007. "Market Definition: Use and Abuse," EAG Discussions Papers 200706, Department of Justice, Antitrust Division.
  • Handle: RePEc:doj:eagpap:200706
    as

    Download full text from publisher

    File URL: https://www.justice.gov/atr/public/eag/225693.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ken Heyer, 2006. "Welfare Standards and Merger Analysis: Why Not the Best?," CPI Journal, Competition Policy International, vol. 2.
    2. David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
    3. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    4. Ken Heyer, 2006. "Predicting the Competitive Effects of Mergers by Listening to Customers," EAG Discussions Papers 200611, Department of Justice, Antitrust Division.
    5. Kenneth Heyer, 2006. "Welfare Standards and Merger Analysis: Why not the Best?," EAG Discussions Papers 200608, Department of Justice, Antitrust Division.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oğuz, Fuat & Akkemik, K. Ali & Göksal, Koray, 2015. "Toward a wider market definition in broadband: The case of Turkey," Utilities Policy, Elsevier, vol. 37(C), pages 111-119.
    2. Dennis Carlton & Ken Heyer, 2007. "The Year in Review: Economics at the Antitrust Division, 2006–2007," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(2), pages 121-137, September.
    3. Stöhr, Annika, 2021. "Price effects of horizontal mergers: A retrospective on retrospectives," Ilmenau Economics Discussion Papers 151, Ilmenau University of Technology, Institute of Economics.
    4. Willem H. Boshoff, 2013. "Why define markets in competition cases?," Working Papers 10/2013, Stellenbosch University, Department of Economics.
    5. Hongjai Rhee & Minsoo Park, 2011. "Fixed-to-mobile call substitution and telephony market definition in Korea," Journal of Regulatory Economics, Springer, vol. 40(2), pages 198-218, October.
    6. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 155-176, Summer.
    7. Dennis W. Carlton & Mark A. Israel, 2021. "Effects of the 2010 Horizontal Merger Guidelines on Merger Review: Based on Ten Years of Practical Experience," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 213-234, February.
    8. Coate, Malcolm B. & Ulrick, Shawn W. & Yun, John M., 2021. "Tailoring critical loss to the competitive process," International Review of Law and Economics, Elsevier, vol. 65(C).
    9. Lapo Filistrucchi, 2008. "A SSNIP test for two-sided markets: the case of media," Working Papers 08-34, NET Institute, revised Oct 2008.
    10. John Lopatka, 2011. "Market Definition?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 69-93, August.
    11. Aashna Mehta & Habib Hasan Farooqui & Sakthivel Selvaraj, 2016. "A Critical Analysis of Concentration and Competition in the Indian Pharmaceutical Market," PLOS ONE, Public Library of Science, vol. 11(2), pages 1-11, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    2. Russell Pittman, 2007. "Consumer Surplus as the Appropriate Standard for Antitrust Enforcement," EAG Discussions Papers 200709, Department of Justice, Antitrust Division.
    3. Amelio, Andrea & Giardino-Karlinger, Liliane & Valletti, Tommaso, 2020. "Exclusionary pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    4. Kenneth Heyer, 2014. "Consumer Welfare and the Legacy of Robert Bork," Journal of Law and Economics, University of Chicago Press, vol. 57(S3), pages 19-32.
    5. Dragan Jovanovic & Christian Wey & Mengxi Zhang, 2021. "On the social welfare effects of runner-up mergers in concentrated markets," Economics Bulletin, AccessEcon, vol. 41(4), pages 2330-2337.
    6. Panos Constantinides & Ola Henfridsson & Geoffrey G. Parker, 2018. "Introduction—Platforms and Infrastructures in the Digital Age," Information Systems Research, INFORMS, vol. 29(2), pages 381-400, June.
    7. Heiko Karle & Martin Peitz & Markus Reisinger, 2020. "Segmentation versus Agglomeration: Competition between Platforms with Competitive Sellers," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2329-2374.
    8. Oliver Budzinski & Annika Stöhr, 2019. "Competition policy reform in Europe and Germany – institutional change in the light of digitization," European Competition Journal, Taylor & Francis Journals, vol. 15(1), pages 15-54, January.
    9. Katona, Katalin, 2019. "Managed competition in practice : Lessons for healthcare policy," Other publications TiSEM 2c2dd13d-91a8-4706-b705-9, Tilburg University, School of Economics and Management.
    10. Budzinski, Oliver, 2016. "Aktuelle Herausforderungen der Wettbewerbspolitik durch Marktplätze im Internet," Ilmenau Economics Discussion Papers 103, Ilmenau University of Technology, Institute of Economics.
    11. Lapo Filistrucchi & Damien Geradin & Eric van Damme, 2012. "Identifying Two-Sided Markets," Working Papers - Economics wp2012_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    12. Frauke Becker & Karen Gedenk, 2020. "Optimale nichtlineare Tarife auf zweiseitigen Medien-Märkten [Optimal Nonlinear Pricing in Two-Sided Media Markets]," Schmalenbach Journal of Business Research, Springer, vol. 72(4), pages 423-445, December.
    13. Justus Haucap & Ulrich Heimeshoff, 2014. "Google, Facebook, Amazon, eBay: Is the Internet driving competition or market monopolization?," International Economics and Economic Policy, Springer, vol. 11(1), pages 49-61, February.
    14. Ghosh, Arghya & Morita, Hodaka, 2012. "Competitor collaboration and product distinctiveness," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 137-152.
    15. Peitz, Martin & Valletti, Tommaso, 2015. "Reassessing competition concerns in electronic communications markets," Telecommunications Policy, Elsevier, vol. 39(10), pages 896-912.
    16. Justus Haucap & Torben Stühmeier, 2016. "Competition and antitrust in Internet markets," Chapters, in: Johannes M. Bauer & Michael Latzer (ed.), Handbook on the Economics of the Internet, chapter 9, pages 183-210, Edward Elgar Publishing.
    17. Paul Belleflamme & Julien Jacqmin, 2016. "An Economic Appraisal of MOOC Platforms: Business Models and Impacts on Higher Education," CESifo Economic Studies, CESifo, vol. 62(1), pages 148-169.
    18. Oliver Budzinski & Janina Satzer, 2011. "Sports Business and Multisided Markets: Towards a New Analytical Framework? (Long Version)," Working Papers 1104, International Association of Sports Economists;North American Association of Sports Economists.
    19. Martin Peitz, 2006. "Marktplätze und indirekte Netzwerkeffekte," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(3), pages 317-333, August.
    20. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 155-176, Summer.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:doj:eagpap:200706. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tung Vu (email available below). General contact details of provider: https://edirc.repec.org/data/atrgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.