Market Definition: Use and Abuse
Dennis W. Carlton, EAG 07-6, April 2007
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Abstract:
A “market” can be rigorously and precisely defined quantitatively, but the information to
do so is typically not available. Instead, markets are often defined based on qualitative
information, leading to the possibility of errors. I make some practical suggestions to mitigate
such errors. When markets are correctly defined, it is the change in market shares that is central to
the antitrust analysis, though this is not how courts typically use market definition and shares to
analyze Section 2 cases. Unfortunately, there is only a weak link between change in market share
and change in competitive performance, and that is why market definition and the use of market
shares are very crude tools of analysis. That is why their best use is as safe harbors to quickly
screen out frivolous cases from those where the economic forces governing industry behavior need
to be carefully studied. But, I explain why even this use of market definition and market shares
can be problematic in Section 2 cases.