Using Stationarity Tests in Antitrust Market Definition

Mario Forni

American Law and Economics Review, 2004, vol. 6, issue 2, 441-464

Abstract: In this article it is argued that, if two products or geographic areas belong in the same market, their relative price must be stationary. Hence stationarity tests like the Augmented Dickey-Fuller and the KPSS can be helpful in delineating the relevant market for antitrust purposes, particularly for abuses of dominant positions and agreements between competitors. The proposed procedure is strictly related to cointegration analysis but is simpler and has more general validity. An application to the Italian milk market illustrates the technique. Copyright 2004, Oxford University Press.

Date: 2004
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