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Defining the Relevant Product Market: An Application of Price Tests to the Beer Market in Barbados

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  • Hippolyte, Rommell

Abstract

This paper attempts to determine if beer is a separate relevant product market from rum and soft drinks. Three conventional statistical tests - Pearson’s correlation, unit root and Granger causality - are applied to average monthly retail price data from Barbados for the three categories of beverages for the period January 2012 to July 2015. The results of both the correlation and Granger causality tests suggest that beer is a distinct product market from rum and soft drinks, while the result of the unit root test was inconclusive. The results of the paper should interest practitioners of competition law in the Caribbean region as it shows that price tests could be used as quantitative proof on market boundaries to support the intuition and evidence the traditional Small but Significant Non-transitory Increase in Price (SSNIP) test provides.

Suggested Citation

  • Hippolyte, Rommell, 2016. "Defining the Relevant Product Market: An Application of Price Tests to the Beer Market in Barbados," MPRA Paper 76183, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:76183
    as

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    File URL: https://mpra.ub.uni-muenchen.de/76183/1/MPRA_paper_76183.pdf
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    References listed on IDEAS

    as
    1. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    2. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
    3. Mario Forni, 2004. "Using Stationarity Tests in Antitrust Market Definition," American Law and Economics Review, Oxford University Press, vol. 6(2), pages 441-464.
    4. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    5. Patrick Massey, 2000. "Market Definition and Market Power in Competition Analysis - Some Practical Issues," The Economic and Social Review, Economic and Social Studies, vol. 31(4), pages 309-328.
    6. Daniel Hosken & Christopher T. Taylor, 2004. "Discussion of "Using Stationarity Tests in Antitrust Market Definition"," American Law and Economics Review, Oxford University Press, vol. 6(2), pages 465-475.
    7. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    price tests; relevant market; beverages; competition law; Barbados;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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