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Repurposing NSSO Data for Market Definition
The definition of the relevant antitrust market is a critical first step in a competition economics investigation. For certain products, publicly available data in the form of the large sample household consumption expenditure survey can be used to implement small but significant and non-transitory increase in price tests for a range of consumer goods at different levels of geographic aggregation. Demand elasticities for a set of consumption goods are estimated through use of the Heckman sample selection model, which corrects for sample selection biases and specification errors that appear in survey data. Among other things, the conditions under which biased elasticity estimates lead to overly wide or overly narrow market definition are also illustrated.
Competition economics is concerned with the determination and measurement of market abuse. Practitioners identify and measure market abuse by considering factors on both the demand and supply sides of the market. On the demand side, the key question is whether consumers will switch away from the alleged market-abusing firm(s), if they raise prices or engage in other anti-competitive behaviour. On the supply side, the key question is whether competitors, upstream and downstream commercial relationships, legal and administrative rules and other conditions, constrain anti-competitive behaviour. However, analyses of these issues can only begin once the market has been defined. Market definition is, therefore, a necessary and critical first step in any evaluation of market power and the anti-competitive effects of business conduct (Baker 2007). It is an initial discrete exercise to determine whether a given product or service lies within a given market or not (Amelio and Donath 2009).
The starting point of a market definition exercise is typically the small but significant and non-transitory increase in price (SSNIP) test, where the SSNIP is taken by custom as 5%–10% (Harbord and von Graevenitz 2000). The SSNIP test was first defined in the 1982 merger guidelines promulgated by the United Status (US) Department of Justice and has since found broad acceptance among practitioners around the world.
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