14 research outputs found
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
A Comment on "Estimating Dynamic Discrete Choice Models with Hyperbolic Discounting" by Hanming Fang and Yang Wang
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