THE SSNIP TEST AND MARKET DEFINITION WITH THE AGGREGATE DIVERSION RATIO: A REPLY TO KATZ AND SHAPIRO

Øystein Daljord, Lars Sørgard and Øyvind Thomassen

Journal of Competition Law and Economics, 2008, vol. 4, issue 2, 263-270

Abstract: The Hypothetical Monopolist or Small but Significant Non-transitory Increase in Prices (SSNIP) test defines the relevant market by determining whether a given increase in product prices would be profitable for a monopolist in the candidate market. The U.S. Merger Guidelines do not specify whether the SSNIP test should be performed with an increase in one price, some prices, or all prices in the candidate market. We argue that this should depend on characteristics of the market: if there are asymmetries between products, increasing only one price might be the best way to identify competitive constraints. Katz and Shapiro derive a one-price test criterion of critical loss in terms of the aggregate diversion ratio. Unfortunately, the derivation is incorrect. We show what the correct criterion should be.

JEL-codes: K21 L1 L11 L12 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:4:y:2008:i:2:p:263-270.

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Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

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