Market Definition in Online Markets

Journal of Competition Law & Economics, 4(3), 639–653 (Sept. 2008).  Michael R. Baye, Bert Elwert Professor of Business Economics, Kelley School of Business, Indiana University.

Although the basic principles used to define a relevant market or to analyze unilateral competitive effects in traditional retail settings also apply in online retail markets, several features of the online environment add complexities to the analysis. This paper examines some of the results in the economics and marketing literatures that can influence market definition and competitive effects analysis in online retail settings. I argue that a failure to account properly for certain aspects of online markets can lead to erroneous definitions of the relevant market and, more importantly, erroneous conclusions regarding the unilateral competitive effects of horizontal mergers.

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