Foundations and Limitations
Edited by Josef Drexl, Wolfgang Kerber and Rupprecht Podszun
Chapter 4: Current Issues in Antitrust Analysis
Daniel L. Rubinfeld INTRODUCTION The use of empirical methods to study competitive issues, especially those relating to mergers, has been continually expanding in recent years. That growth has not come without controversy, however. In this chapter, I comment on three such issues. The first relates to market definition, the second to the relevance of market power measures in unilateral effects merger analysis, and the third to the use of merger simulation methods, again in the context of unilateral effects analysis. Market definition has historically been seen as a necessary, indeed often crucial, first step in the analysis of mergers as well as non-merger behaviour. I will point out, however, that there are circumstances in which it is preferable to skip the definition of markets and move directly to the analysis of competitive effects. With respect to market power, there has been a view that HHIs and other measures of market concentration are not especially relevant in unilateral effects analyses.1 I will suggest the contrary – that HHIs can be instructive, even in the unilateral effects context. Finally, there has been substantial debate about the use and misuse of merger simulation methods. I will explain why I consider merger simulation methods to be of continuing value, and I will discuss the current debate as to which simulation approach is most useful. 2. MARKET DEFINITION The exercise of market power requires that the firm or firms involved (collectively) face a relatively inelastic demand curve for a product at ‘competitive’ prices. Only then can...
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