Quantitative competition analysis: Stationarity tests in geographic market definition

Stellenbosch Working Paper Series No. WP17/2006
Publication date: 2006
Author(s):
Abstract:

The paper focuses on the delineation of geographic markets in competition analysis, investigating the use of both quantitative and qualitative evaluation in the market definition exercise. To this end, the first part is devoted to a conceptual framework for market definition (adopted from Haldrup (2003)). Thereafter, a variety of price tests are explored that can be applied within the quantitative part of the framework. Similar to Forni (2004), the paper emphasizes the use of stationarity tests (that is, tests for the existence of unit roots) – illustrating their application to a recent competition investigation in South Africa.

JEL Classification:

L40, L41, L43, D4

Keywords:

Market definition, Delineation, Quantitative, Stationarity tests, Prices, Geographic, SSNIP, Hypothetical monopolist, Competition, Unit root, Price ratio, Antitrust

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