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Unformatted text preview: D could easily serve this route if
prices are increased: A+B has no market power
prices Market is not the route but bus services in the
34 Problem of SSNIP test: „Cellophane Fallacy“
In non-merger cases SSNIP test is problematic,
position whether a firm was abusing a dominant One
One should NOT ask whether a HM can
increase prices relative to current level
current but rather relative to competitive prices!
competitive Using current level will lead to too wide market
because firm has dominant position already!!!
because If you are monopolist already, you would find it
not profitable to raise price above monopoly
35 Problem of SSNIP test: „Cellophane Fallacy“
„Cellophane du Pont case US Supreme Court: high cross elasticity of
demand between cellophane (sold by du Pont)
and other wrapping material
and this calls for wider definition of market BUT high elasticity of substitution was itself an
indication of the high market power of du Pont
indication As they were monopolist, they already charged
36 Implementing SSNIP test Look at data: Own price elasticity %-change in quantity demanded if price changed by 1% Typically estimated with econometric model including control
variables Cross-price Also Price elasticities econometric model correlation tests look
look at prices of different goods over time: do they move in
same way? same market (also for geographic areas) Price
Price differences not very useful (due to possible
37 Implementing SSNIP test Goods‘
Goods‘ characteristics and Usage and
Are train and bus the same product? Maybe as
they may offer the same service.
Consumer surveys could be useful to know this Temporal, seasonal, and multiple markets restaurant
restaurant vs. bar same market for lunch time,
but different in the evening.
Bananas same market as oranges in winter time,
but other market in summer
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This note was uploaded on 01/22/2014 for the course ECON D0T32A taught by Professor Czarnitzkidirk during the Spring '13 term at Katholieke Universiteit Leuven.
- Spring '13