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A SSNIP test for two-sided markets: the case of media

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Abstract

I discuss the design and implementation of a SSNIP test in order to identify the relevant market in a media market. I argue that in such a two-sided market the traditional SSNIP test cannot be applied as it is usually conceived but rather should be modified in order to take into account indirect network externalities. I discuss the issues of which price the hypothetical monopolist should be thought of as raising, of whether we should look at profits changes on only one side or on both sides of the market and of which feedback among the two sides of the market we should take into account. I then derive the relevant formulas for Critical Loss Analysis. These look much uglier than in a single-sided market but in fact they are easy to calculate as they are still expressed in terms of elasticities and of current observed markups, prices and quantities. Data requirements are however higher as one needs to estimate the matrixes of the own and cross price elasticities of demand on the two-sides of the market and the matrixes of the network effects. The paper fills a gap in the economic literature, so much more as market definition in media markets is at the centre of many recent competition policy and regulation cases around the world.

Suggested Citation

  • Lapo Filistrucchi, 2008. "A SSNIP test for two-sided markets: the case of media," Working Papers 08-34, NET Institute, revised Oct 2008.
  • Handle: RePEc:net:wpaper:0834
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    7. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 483-512.
    8. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    9. Ambarish Chandra & Allan Collard‐Wexler, 2009. "Mergers in Two‐Sided Markets: An Application to the Canadian Newspaper Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1045-1070, December.
    10. 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.
    11. Elena Argentesi & Lapo Filistrucchi, 2007. "Estimating market power in a two-sided market: The case of newspapers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
    12. Ivaldi, Marc & Argentesi, Elena, 2005. "Market Definition in the Printed Media Industry: Theory and Practice," CEPR Discussion Papers 5096, C.E.P.R. Discussion Papers.
    13. David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
    14. Unknown & Dennis Carlton, 2007. "Market Definition: Use and Abuse," CPI Journal, Competition Policy International, vol. 3.
    15. 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.
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    Cited by:

    1. 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.
    2. Tosza, Katarzyna, 2009. "Payment Card Systems as an Example of two-sided Markets - a Challenge for Antitrust Authorities," MPRA Paper 23822, University Library of Munich, Germany.
    3. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    4. Hamelmann, Lisa & Haucap, Justus & Wey, Christian, 2015. "Die wettbewerbsrechtliche Zulässigkeit von Meistbegünstigungsklauseln auf Buchungsplattformen am Beispiel von HRS," DICE Ordnungspolitische Perspektiven 72, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. 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.
    6. Willem H. Boshoff, 2011. "Antitrust market definition using statistical learning techniques and consumer characteristics," Working Papers 224, Economic Research Southern Africa.
    7. Lapo Filistrucchi & Tobias J. Klein & Thomas O. Michielsen, 2012. "Assessing Unilateral Merger Effects in the Dutch Daily Newspaper Market," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.), Recent Advances in the Analysis of Competition Policy and Regulation, chapter 10, Edward Elgar Publishing.
    8. Krämer, Jan & Wohlfarth, Michael, 2018. "Market power, regulatory convergence, and the role of data in digital markets," Telecommunications Policy, Elsevier, vol. 42(2), pages 154-171.
    9. Steffen, Nico & Wiewiorra, Lukas & Kroon, Peter, 2021. "Wettbewerb und Regulierung in der Plattform- und Datenökonomie," WIK Discussion Papers 481, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    10. Dittmann, Heidi & Kuchinke, Björn, 2020. "Die Theorie mehrseitiger Marktplätze in der US-amerikanischen und deutschen Zusammenschlusskontrollle: Eine empirische Untersuchung für den Mediensektor," Ilmenau Economics Discussion Papers 136, Ilmenau University of Technology, Institute of Economics.

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    More about this item

    Keywords

    two-sided markets; SSNIP test; Hypothetical Monopolist test; critical loss analysis; critical elasticity analysis; market definition; media;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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