Why the relevant geographic market is larger

Reference no: EM13212893

A firm, which is the only supplier of a good located in a particular town, is accused of engaging in anticompetitive tactics in order to protect its monopoly position in that town. As part of its defense, the firm has argued that the geographic antitrust market includes a larger neighbouring city with multiple firms. The defense offers two pieces of evidence in support of its larger geographic market: (1) the correlation coefficient between the price in the town and the nearby city is 0.95, looking at weekly prices for recent years, and (2) a recent survey of consumers in the town, conducted by the firm's marketing branch, revealed that a 5% increase in prices above current levels would be unprofitable because too many consumers would switch to purchasing from the city. In this larger geographic market, the firm's market share is low. Therefore, the defense claims, the firm does not have the market power necessary to carry out anticompetitive practices or to make them worthwhile. Offer a critique of the firm's arguments regarding market definition. Can we conclude that the relevant geographic market is larger than the town based on the evidence presented? NOTE: the defense's arguments may be flawed for multiple reasons.

Reference no: EM13212893

Questions Cloud

Compute the vapor pressure above concentrated naoh : Calculate the vapor pressure above concentrated NaOH at 35.0 °C, given vapor pressure of H2Ois 42.2 mm Hg at 35.0 °C.

Why marginal cost pricing forever as punishment strategy : Suppose that there are three firms, who produce homogeneous products, and whom have the same marginal cost which is constant over output. These firms play an infinitely repeated Bertrand pricing game. Each period they simultaneously set prices.

Explain unknown hydrocarbon with chemical formula : Researchers analyzing an unknown hydrocarbon with chemical formula CxHy found that 225 grams of O2(g) were required for complete combustion of 1.0 mol CxHy, to form CO2(g) and H2O(g) only.

Compute the percent composition of each element : Calculate the percent composition of each element (H, C, N, O) in ammonium carbonate and acetic acid

Why the relevant geographic market is larger : As part of its defense, the firm has argued that the geographic antitrust market includes a larger neighbouring city with multiple firms. The defense offers two pieces of evidence in support of its larger geographic market.

Set up the negative feedback system : Using MATLAB Simulink, set up the negative feedback system of and find the value of the gain

Evaluate the cancer center capital investment project : What information is needed by the CFO to evaluate the Cancer Center capital investment project - Compare and contrast the kinds of decisions that are made in the Cancer Center capital investment decision analysis for the for-profit and non-profit h..

What is the ideal mechanical advantage of the wedge : A hydraulic shear applies 2000 lb force to a wedge. It is used to shear plate steel to rough size. The shear has a 1/4 inch thick cutting blade with a 45 degree slope. What is the ideal mechanical advantage of the wedge?

What is the activitys slope : Given that an activity's normal time and cost are 10 days and $400 and its crash time and cost are 5 days and $800, what is the activity's slope?

User Account

All Pages