IDEAS home Printed from https://ideas.repec.org/p/yon/wpaper/2025rwp-262.html
   My bibliography  Save this paper

Market Definition: A Sensitivity Analysis

Author

Listed:
  • Paul S. Koh

    (Yonsei University)

Abstract

Market definition holds significant importance in antitrust cases, yet achieving consensus on the correct approach remains elusive. As a result, analysts routinely entertain multiple market definitions to ensure the resilience of their conclusions. I propose a simple framework for conducting organized sensitivity analysis with respect to market definition. I model candidate market definitions as partially ordered and use a Hasse diagram, a directed acyclic graph representing a finite partial order, to summarize the sensitivity analysis. I use the Shapley value and the Shapley-Shubik power index to quantify the average marginal contribution of each firm in driving the conclusion. I illustrate the method's usefulness with an application to the Albertsons/Safeway (2015) merger.

Suggested Citation

  • Paul S. Koh, 2025. "Market Definition: A Sensitivity Analysis," Working papers 2025rwp-262, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2025rwp-262
    as

    Download full text from publisher

    File URL: http://121.254.254.220/repec/yon/wpaper/2025rwp-262.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paul S. Koh, 2022. "Stable Outcomes and Information in Games: An Empirical Framework," Papers 2205.04990, arXiv.org, revised May 2023.
    2. Kaplow, Louis, 2015. "Market definition, market power," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 148-161.
    3. Christopher Conlon & Julie Holland Mortimer, 2021. "Empirical properties of diversion ratios," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 693-726, December.
    4. Volker Nocke & Michael D. Whinston, 2022. "Concentration Thresholds for Horizontal Mergers," American Economic Review, American Economic Association, vol. 112(6), pages 1915-1948, June.
    5. Nathan H. Miller & Gloria Sheu, 2021. "Quantitative Methods for Evaluating the Unilateral Effects of Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 143-177, February.
    6. Kaplow, Louis, 2021. "Horizontal merger analysis," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    7. Louis Kaplow, 2011. "Market Definition and the Merger Guidelines," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 107-125, August.
    8. Werden, Gregory J, 1996. "A Robust Test for Consumer Welfare Enhancing Mergers among Sellers of Differentiated Products," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 409-413, December.
    9. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    10. Peter Davis & Eliana Garcés, 2009. "Quantitative Techniques for Competition and Antitrust Analysis," Economics Books, Princeton University Press, edition 1, number 9078.
    11. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
    12. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
    13. Koh, Paul S., 2023. "Stable outcomes and information in games: An empirical framework," Journal of Econometrics, Elsevier, vol. 237(1).
    14. Volker Nocke & Nicolas Schutz, 2018. "Multiproduct‐Firm Oligopoly: An Aggregative Games Approach," Econometrica, Econometric Society, vol. 86(2), pages 523-557, March.
    15. Shapley, L. S. & Shubik, Martin, 1954. "A Method for Evaluating the Distribution of Power in a Committee System," American Political Science Review, Cambridge University Press, vol. 48(3), pages 787-792, September.
    16. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    17. Louis Kaplow, 2015. "Market Definition, Market Power," NBER Working Papers 21167, National Bureau of Economic Research, Inc.
    18. Werden, G.J., 1992. "The History of Antitrust Market Delineation," Papers 92-8, U.S. Department of Justice - Antitrust Division.
    19. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-313, June.
    Full references (including those not matched with items on IDEAS)

    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. Paul S. Koh, 2024. "Market Definition: A Sensitivity Analysis," Papers 2407.12774, arXiv.org, revised Oct 2025.
    2. Paul S. Koh, 2025. "Merger Analysis with Unobserved Prices," Working papers 2025rwp-263, Yonsei University, Yonsei Economics Research Institute.
    3. Mansley, Ryan & Miller, Nathan H. & Sheu, Gloria & Weinberg, Matthew C., 2023. "A price leadership model for merger analysis," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    4. Paul S. Koh, 2024. "Merger Analysis with Unobserved Prices," Papers 2404.07684, arXiv.org, revised Aug 2025.
    5. Nathan H. Miller & Gloria Sheu, 2021. "Quantitative Methods for Evaluating the Unilateral Effects of Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 143-177, February.
    6. Louis Kaplow, 2024. "The 2023 Merger Guidelines and Market Definition: Doubling Down or Folding?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 65(1), pages 7-37, August.
    7. 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.
    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. Steven T. Berry & Philip A. Haile, 2024. "Nonparametric Identification of Differentiated Products Demand Using Micro Data," Econometrica, Econometric Society, vol. 92(4), pages 1135-1162, July.
    10. Berger, David & Hasenzagl, Thomas & Herkenhoff, Kyle & Mongey, Simon & Posner, Eric A., 2025. "Merger guidelines for the labor market," Journal of Monetary Economics, Elsevier, vol. 153(C).
    11. Nathan H. Miller & Marc Remer & Conor Ryan & Gloria Sheu, 2016. "Pass-Through and the Prediction of Merger Price Effects," Journal of Industrial Economics, Wiley Blackwell, vol. 64(4), pages 683-709, December.
    12. Philip G. Gayle & Ying Lin, 2022. "Market effects of new product introduction: Evidence from the brew‐at‐home coffee market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 525-557, August.
    13. Paul S. Koh, 2024. "Concentration-Based Inference for Evaluating Horizontal Mergers," Papers 2407.12924, arXiv.org, revised Sep 2025.
    14. Budzinski, Oliver & Gänßle, Sophia & Stöhr, Annika, 2020. "The draft for the 10th amendment of German competition law: Towards a new concept of "Outstanding relevance across markets"?," Ilmenau Economics Discussion Papers 142, Ilmenau University of Technology, Institute of Economics.
    15. Budzinski, Oliver & Lindstädt-Dreusicke, Nadine, 2019. "The new media economics of video-on-demand markets: Lessons for competition policy (updated version)," Ilmenau Economics Discussion Papers 125, Ilmenau University of Technology, Institute of Economics.
    16. Budzinski, Oliver & Lindstädt-Dreusicke, Nadine, 2018. "The new media economics of video-on-demand markets: Lessons for competition policy," Ilmenau Economics Discussion Papers 116, Ilmenau University of Technology, Institute of Economics.
    17. Friberg, Richard & Romahn, André, 2015. "Divestiture requirements as a tool for competition policy: A case from the Swedish beer market," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 1-18.
    18. Christopher Conlon & Julie Holland Mortimer, 2021. "Empirical properties of diversion ratios," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 693-726, December.
    19. Verboven, Frank & Bourreau, Marc & Sun, Yutec, 2018. "Market Entry, Fighting Brands and Tacit Collusion: The Case of the French Mobile Telecommunications Market," CEPR Discussion Papers 12866, C.E.P.R. Discussion Papers.
    20. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 3-30, Spring.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:yon:wpaper:2025rwp-262. 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: YERI (email available below). General contact details of provider: https://edirc.repec.org/data/eryonkr.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.