Generalized Critical Loss for Market Definition

Abstract

This paper generalizes the critical loss concept of Harris and Simons to account for a broader range of possible cost structures. Our analysis presents a specialized market-level equilibrium for a relatively homogeneous good in which the Harris and Simons’ critical loss structure is appropriate for market definition. Then, we broaden the equilibrium and propose a generalized critical loss analysis. Of course, for relatively differentiated goods, market definition analysis would use firm-level modeling and therefore the standard market-level critical loss modeling could be inappropriate.

Citation

Coate, M.B. and Williams, M.D. (2007), "Generalized Critical Loss for Market Definition", Zerbe, R.O. and Kirkwood, J.B. (Ed.) Research in Law and Economics (Research in Law and Economics, Vol. 22), Emerald Group Publishing Limited, Leeds, pp. 41-58. https://doi.org/10.1016/S0193-5895(06)22003-7