MARKET DEFINITION AS A PROBLEM OF STATISTICAL INFERENCE

Willem Boshoff

Journal of Competition Law and Economics, 2014, vol. 10, issue 4, 861-882

Abstract: Market definition is conducted under conditions of notable uncertainty, due to conceptual ambiguity and model uncertainty. Statistical decision theory can help to explain and improve the market definition decision. Specifically, a Bayesian decision rule can assist analysts in defining markets by considering (1) the weight of evidence in favor and against substitutability (implying a ranking of substitutes), (2) prior probabilities determined by previous cases and research (setting a benchmark for inclusion in the market), and (3) error costs of incorrect inclusion or exclusion from the market. The article studies how employing such a decision rule would have improved the market definition exercise in a landmark South African merger case.

JEL-codes: D40 K00 L40 L41 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:10:y:2014:i:4:p:861-882.

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