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« A SSNIP Test for two-sided Markets » by Lapo Filistrucchi

« A SSNIP Test for two-sided Markets » by Lapo Filistrucchi. Discussant: Bruno Karoubi Télécom Paris. The Relevant Market problem. Defining the relevant market is a major issue for antitrust authorities.

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« A SSNIP Test for two-sided Markets » by Lapo Filistrucchi

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  1. « A SSNIP Test for two-sided Markets » by Lapo Filistrucchi Discussant: Bruno Karoubi Télécom Paris

  2. The Relevant Market problem • Defining the relevant market is a major issue for antitrust authorities. • All the more true when goods are horizontally differentiated (wrist watches and pocket watches, proprietary payment cards vs. non proprietary payment cards…). • Which set of goods can be deemed to constitute an independent market? mergers’/monopolist interests is to consider it as small as possible (Market power is inversely proportional to price elasticity). • Evaluating empirical price elasticity and substitutability between goods of the potential relevant market.

  3. The SSNIP Test is irrelevant for TSM • The SSNIP test: • the relevant market is supposed to be as small as possible. • simulating the effect of a small but significant increase of price (cf. Federal Trade Commission and Department of Justice guidelines,82). • if this price increase reduces profits, the relevant market is extended to a marginal set of goods and the process is repeated. • The relevant market is the smallest one in which a price increase is profitable or neutral. • The standard SSNIP test neglects the indirect network externality from one side of the market to the other. Therefore, the market size is systematically underestimated when applied to a 2SM.

  4. Adapting the SSNIP test to TSMs This paper aims at providing a feasible method to assess the relevant two sided market. • Adapting the notion of price increase. Four options are examined. • Taking into account three types of feedback effects. A/ Between the two sides of the market for a given good B/ Differentiated products C/Potential relevant goods • Discriminating between two types of 2SM : M-type and PC-type.

  5. Discussion • Critical Loss Analysis Test? • The feedback effect of side A on side B itself has a second order feedback effect on side A… Can we expect the feedback effect to decrease as its order increases, and for what reason? Is the additional computational burden heavy? • Applications.

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