Tuesday, June 3, 2008
Posted by D. Daniel Sokol
Michael R. Baye of the Kelly School of Business at Indiana University (currently head of BE at the FTC) has a great piece on Market Definition and Unilateral Competitive Effects in Online Retail Markets in the latest issue of the Journal of Competition Law and Economics.
ABSTRACT: Although the basic principles used to define a relevant market or to analyze unilateral competitive effects in traditional retail settings also apply in online retail markets, several features of the online environment add complexities to the analysis. This paper examines some of the results in the economics and marketing literatures that can influence market definition and competitive effects analysis in online retail settings. I argue that a failure to account properly for certain aspects of online markets can lead to erroneous definitions of the relevant market and, more importantly, erroneous conclusions regarding the unilateral competitive effects of horizontal mergers.