The Concept of the Market and Antitrust

Posted: 17 Jan 2000

See all articles by Pierluigi Sabbatini

Pierluigi Sabbatini

Government of the Italian Republic (Italy) - Italian Competition Authority

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Abstract

The essay examines the genesis of the concept of the market, the conditions that must be met for it to be used in economic analysis, and the reasons why the concept is questionable. In order for the concept of market to play a significant and non-contradictory role in economic (and antitrust) analysis, two conditions must be fulfilled. First, the characteristics of demand must be such as to demarcate a market unequivocally. Second, the competition in a specific market must have limited interaction with the rest of economy. In general, these conditions cannot be met. First, the non-constancy of the elasticity of the demand function means that the size of the market depends on its structure and on the behavior of its agents. Second, given differentiated products, the competitive relations between them will be dishomogeneous, giving rise to as many market segments as there are individual products. Third, supply-side substitutability, i.e. the possibility of using a given technique to produce several products (not all in the same market) ensures that intraindustry economic dynamics prevail over intra-market ones. And finally, multimarket contacts between firms generate overall strategic conduct, making analysis of any particular market irrelevant. These four objections do not appear pertinent to markets in which perfect competition obtains. Accordingly, it is only in such markets that the concept of market itself can be analyzed consistently. It is therefore amusing, if disconcerting, to find this concept regularly employed in antitrust proceedings, which are presumed to deal with situations of imperfect competition.

JEL Classification: B13, D43, L13, L40

Suggested Citation

Sabbatini, Pierluigi, The Concept of the Market and Antitrust. Available at SSRN: https://ssrn.com/abstract=187154

Pierluigi Sabbatini (Contact Author)

Government of the Italian Republic (Italy) - Italian Competition Authority ( email )

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