Friday, July 25, 2008
Posted by D. Daniel Sokol
Eating a bagel with lox and cream cheese this morning for breakfast, the following article had particular relevance - Sequential Versus Simultaneous Market Delineation: The Relevant Antitrust Market for Salmon by Niels Haldrup, University of Aarhus - Department of Economics; Peter Mollgaard, Copenhagen Business School - Department of Economics; University of Aarhus - Department of Management; and Claus Kastberg Nielsen, Copenhagen Economics.
ABSTRACT: Delineation of the relevant market forms a pivotal part of most antitrust cases. The standard approach is sequential. First the product market is delineated, then the geographical market is defined. Demand and supply substitution in both the product dimension and the geographical dimension will normally be stronger than substitution in either dimension. By ignoring this, one might decide first to define products narrowly and then to define the geographical extent narrowly ignoring the possibility of a diagonal substitution. These reflections are important in the empirical delineation of product and geographical markets. Using a unique data set for prices of Norwegian and Scottish salmon, we propose a methodology for simultaneous market delineation and we demonstrate that compared to a sequential approach conclusions will be reversed.