Edited by Manfred Neumann and Jürgen Weigand
Paul Geroski and Rachel Grifﬁth* 1 Why deﬁne markets? The identiﬁcation of markets is a standard feature of antitrust investigations, and the substantive decision in many cases stands or falls on the precise market deﬁnition selected. Market identiﬁcation is important because the computation of market shares matters in antitrust cases, and this is so for at least two reasons. First, market shares are often used to help establish jurisdiction or, more generally, to sort out priorities for antitrust agencies. Merger regulations usually specify a threshold level of market share which triggers an investigation for mergers above a given size; investigations into various monopolistic abuses are usually centered on the leading ﬁrms in a market and, in most cases, the ability of an antitrust agency to initiate an investigation, or impose penalties at the end of it, depends on whether the (alleged) offending ﬁrm enjoys a position of market ‘dominance’; that is enjoys a large market share. Second, market shares are sometimes used as an observable measure of market power, meaning that the fact of ﬁnding high market shares is sometimes taken to be tantamount to uncovering the existence of market power. Since, in practice, the important step in computing market shares is ascertaining the boundaries of the market, this practice tends to make the determination of market boundaries the substantively important decision in any attempt to identify pockets of market power. The use of market shares to establish jurisdiction is a well established procedure. It...
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