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Journal of Competition Law and Economics Advance Access published online on April 22, 2008
Journal of Competition Law and Economics, doi:10.1093/joclec/nhn007
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© The Author (2008). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

A PRACTICAL GUIDE TO THE HYPOTHETICAL MONOPOLIST TEST FOR MARKET DEFINITION

Malcolm B. Coate * and Jeffrey H. Fischer **

The hypothetical monopolist test has been used to define antitrust markets for over 20 years. However, many of these applications occur within the enforcement agencies and thus the implementation process is not fully transparent to antitrust practitioners. This paper provides a study of 116 market definition decisions from the Federal Trade Commission's archives. We find that the agency rarely has trouble defining both product and geographic markets; in fact, the demand-side market definition process is relatively simple in over half of the cases reviewed. In many of the remaining matters, critical loss, analysis of natural experiments, and various studies of data patterns are undertaken to identify the relevant market. These studies show a remarkable variety in data requirements, sophistication, and analytical technique. Supply-side considerations affect a few markets and price discrimination supports more focused analysis in about 10 cases.

* Economist, Federal Trade Commission. E-mail: mcoate{at}ftc.gov

** Economist, Federal Trade Commission. E-mail: jfischer{at}ftc.gov The analyses and conclusions set forth in this paper are those of the authors and do not necessarily represent the views of the Federal Trade Commission, any individual Commissioner, or any Commission Bureau. We would like to thank Mark Williams for helpful comments on this paper.


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