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A Full Equilibrium Relevant Market Test: Application to Computer Servers

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  • Ivaldi, Marc
  • Lörincz, Szabolcs

Abstract

The paper defines, implements and compares two empirical tests of relevant markets. While the traditional SSNIP test compares an initial industry equilibrium to an out-of-equilibrium situation, the FERM test, our contribution, compares the same initial equilibrium to an other equilibrium outcome. Hence, it is more in line with the behavioural assumptions of the underlying model of industry equilibrium and this can have significant consequences. We define these concepts formally and apply them to the industry of computer servers by estimating a model on a large dataset. We find several smaller relevant markets in the low-end segment of servers.
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Suggested Citation

  • 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.
  • Handle: RePEc:ide:wpaper:3936
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    References listed on IDEAS

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    1. Jerome Foncel & Marc Ivaldi, 2005. "Operating System Prices In The Home Pc Market," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 265-297, June.
    2. Brenkers, Randy & Verboven, Frank, 2005. "Market Definition with Differentiated Products - Lessons from the Car Market," CEPR Discussion Papers 5249, C.E.P.R. Discussion Papers.
    3. repec:cup:etheor:v:13:y:1997:i:2:p:185-213 is not listed on IDEAS
    4. 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.
    5. 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(02), pages 185-213, April.
    6. Igal Hendel, 1999. "Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 423-446.
    7. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    8. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    9. 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.
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    Cited by:

    1. Argentesi, Elena & Ivaldi, Marc, 2005. "Market Definition in the Printed Media Industry: Theory and Practice," CEPR Discussion Papers 5096, C.E.P.R. Discussion Papers.
    2. Argentesi, Elena & Ivaldi, Marc, 2005. "Market Definition in Printed Media Industry: Theory and Practice," IDEI Working Papers 376, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Lapo Filistrucchi, 2008. "A SSNIP test for two-sided markets: the case of media," Working Papers 08-34, NET Institute, revised Oct 2008.

    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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