Tuesday, June 7, 2011
Posted by D. Daniel Sokol
Marc Ivaldi, Toulouse School of Economics and Szabolcs Lorincz, European Commission, Directorate-General Competition have written on Implementing Relevant Market Tests in Antitrust Policy: Application to Computer Servers.
ABSTRACT: The paper defines, implements and compares two empirical tests of relevant markets. While the SSNIP test compares an initial industry equilibrium to an out-of-equilibrium situation, the 1984 US Merger Guidelines test compares the same initial equilibrium to a second equilibrium outcome. We define these concepts formally and apply them to the computer server industry by estimating a model on a large dataset. We find several smaller relevant markets in the low-end segment of servers. In addition, we find that the results might be quantitatively significantly different between the two approaches as the SSNIP test changes prices uniformly and does not take into account the multi-product pricing strategies of the firms.