On the Risks of Using the Sequential Product-Level SSNIP Approach to Identify Relevant Antitrust Markets‡

Abstract

In a recent influential paper Coate et al. (2021) have criticized the sequential product-level approach to market definition in merger review. They argue that a simultaneous market-level approach to critical loss is more appropriate than a product-level critical loss analysis, because under certain plausible demand scenarios (nonlinear demand functions) the latter could yield the wrong answer on market definition—i.e., excessively broad or narrow markets. We extend their analysis by showing that a sequential product-level approach actually leads to an excessively narrow market definition when the typical nonlinear demand functions used in merger analysis are employed.