1. Market definition - does it help?
Dr Tony Curzon Price, 9/11/2015
CMA, London

3. A very rough measure
There are a small number of models (eg Cournot, Bertrand with differentiated products (ie Hotelling)) in which market share is a good predictor of damage from a merger
But even then, we want if possible to check for idiosyncrasies in elasticities of demand
Those models are themselves usually very poor representations of reality
repeat games
complex contracts
locational multi-line stores, maybe the best fit, are being disrupted online
Challenge: in what important cases are these good models?

4. Is it innocuous or actually bad?
It’s a legal requirement, but don’t worry - do it after you’ve done the economic analysis so that it “fits”
No, there are cases in which it is a positive hindrance to good decisions. 3 Examples:
Vertical restraints exemption in 101.3
Price discrimination
A platform market Vs

5. Example 1 - The vertical exemption threshold of 30%
“It can be presumed that, where the market share held by each of the undertakings party to the agreement on the relevant market does not exceed 30 %, vertical agreements [...] generally lead to an improvement in production or distribution and allow consumers a fair share of the resulting benefits.”
So, if you can keep below 30% market share, your vertical agreement is OK …
but is market share the right filter and market definition the important question?

6. Market inspired from PMI/PCW
Demand is unproblematic
Market shares are unproblematic
Vertical agreements surely unproblematic...

7. The logic of MFNs
What is arguably a vertical agreement (MFN) leads to monopoly prices
Beware false comfort from market shares

8. Price discrimination inspired from GB domestic energy market
How should we define this market?
Domestic energy market?
No market power issues
Markets for “loyal customers” and “engaged customers”
one is a monopoly, the other is fine
SNIPP - does it work?
2 prices
SNIP (but FRCL)
All the information is in the analysis, not the market definition

9. A 2-sided market
Market definition & shares are unlikely to illuminate market power very much
Right hand market is at zero price
Left hand market looks competitive
Markets can be defined, but does it help?

10. A historical perspective
Epoch of mass production and mass markets (from Model-T 1908 to Oil Crash 1973)
Brands (and therefore differentiated Bertrand)
Retail (Hotelling)
Capacity constrained manufacturing in globalising markets (Cournot & cartels)
Epoch of information markets (from 1971 Intel founding to …)
Low capital costs, high innovation rents
Winner-take-all network economies
Protection sought from frictionlessness markets in vertical/horizontal agreements
Rules made for the first epoch won’t fit the second

11. “The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”
― John Maynard Keynes, The General Theory of Employment, Interest and Money, 1936