Abstract
Abstract This paper formalizes an empirically implementable framework for the definition of local antitrust markets in retail markets. This framework rests on a demand model that captures the trade-off between distance and pecuniary cost across alternative shopping destinations within local markets. The paper develops, and presents estimation results for, an empirical demand model at the store level for groceries in the UK.
Highlights
The definition of the relevant geographic and product markets is a paramount concern in antitrust investigations; see, for example, the Groceries Market inquiry (2007) carried out by the UK Competition Commission.[1]
The first part reports and compares multinomial logit (MNL) and mixed multinomial logit (MMNL) estimates based on the one-stop shopping (OSS) data, and offers some insights from specification testing
This paper provides a micro-econometric framework for geographic antitrust market definition and competitive assessment, embedded into the classical hypothetical monopolist test paradigm
Summary
The definition of the relevant geographic and product markets is a paramount concern in antitrust investigations; see, for example, the Groceries Market inquiry (2007) carried out by the UK Competition Commission.[1]. This formalism provides the context for the remainder of the paper which focusses on the demand-side considerations of this framework to geographic market definition. The primary determinants of switching that are of interest, and amenable to empirical investigation, are prices and relative distances between consumers and alternative retail outlets Studies such as those by some of the aforementioned authors, as well as many antitrust inquiries, examine competition within existing market structures and, typically, use aggregate data that are defined on the level of such pre-defined markets, e.g. market shares and population density measures in lieu of actual household locations and distances to stores.
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