Single-product versus uniform SSNIPs

-This is preprint version of the article "Single-product versus uniform SSNIPs" International Review of Law and Economics Volume 31, Issue 2, June 2011, Pages 142–146.It is common to apply a SSNIP test with a uniform price increase on all products in the candidate market. We show that in situations with asymmetries – for example variations in revenues – a uniform SSNIP test may suggest that the relevant market should include more products even though it could be profitable to increase the price of only one product in the candidate market. Our results are illustrated with some findings from a survey in a local grocery market

Single-product versus uniform SSNIPs

It is common to apply a SSNIP test with a uniform price increase on all products in the candidate market. We show that in situations with asymmetries – for example one product having a limited sale – a uniform SSNIP test can suggest that the relevant market should include more products even though it could be profitable to increase the price of only one product in the candidate market. Our results are illustrated with some findings from a survey in a local grocery market

Making sense of market delineation with the aggregate diversion ratio

The US Merger Guidelines leave it an open question if the SSNIP test requires an increase in one, some or all prices in the candidate market. We argue that the characteristics of the candidate market in question should be decisive for how to perform the SSNIP test. If there are asymmetries between products, increasing one price might be a better procedure in order to identify competitive constraints. Katz & Shapiro (2003) derived a one-price criterion in terms of the aggregate diversion ratio which is applicable for asymmetric candidate markets. Unfortunately, the derivation is incorrect. We derive a corrected criterion

Market definition with shock analysis

The SSNIP test for market definition requires information about demand substitution and profitability. If detailed information about demand is not available, observed effects of a shock in the industry may be an alternative source of evidence. In the existing literature, shock analysis has unfortunately not been clearly linked to the SSNIP test. The lack of a rigorous framework may confuse the interpretation of the effects of shocks. We illustrate how a shock can be evaluated within the SSNIP framework with a minimum of data. We apply our criterion to a capacity expansion in the ferry market in the North Sea

Single-product versus uniform SSNIPs

It is common to apply a SSNIP test with a uniform price increase on all products in the candidate market. We show that in situations with asymmetries - for example variations in revenues - a uniform SSNIP test may suggest that the relevant market should include more products even though it could be profitable to increase the price of only one product in the candidate market. Our results are illustrated with some findings from a survey in a local grocery market.SSNIP Market delineation Asymmetries

Identifying the Discount Factor in Dynamic Discrete Choice Models

Empirical research often cites observed choice responses to variation that shifts expected discounted future utilities, but not current utilities, as an intuitive source of information on time preferences. We study the identification of dynamic discrete choice models under such economically motivated exclusion restrictions on primitive utilities. We show that each exclusion restriction leads to an easily interpretable moment condition with the discount factor as the only unknown parameter. The identified set of discount factors that solves this condition is finite, but not necessarily a singleton. Consequently, in contrast to common intuition, an exclusion restriction does not in general give point identification. Finally, we show that exclusion restrictions have nontrivial empirical content: The implied moment conditions impose restrictions on choices that are absent from the unconstrained model