Defining Product Markets for Retail Rental Space: Thoughts on Methodological Choices

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Series Details Volume 7, Number 3, Pages 421-431
Publication Date September 2011
ISSN 1744-1055
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Introduction:

"Historically, competition authorities in various jurisdictions have only rarely been concerned with antitrust problems in the market for retail rental space and have defined these markets relatively broadly. More recently, however, some competition authorities have reached very different conclusions regarding the scope of the relevant product and geographic market in this sector."
"In this paper we argue that a market segmentation based solely on characteristics will likely fail to identify the correct product markets and will have a general tendency to define markets that are narrower than those reached by applying the logic of the hypothetical monopolist test. The type of criticism of the characteristics approach that we present in this paper is based on well-known economic principles. Why, then, are approaches based solely on characteristics still so popular with competition authorities? We suggest that one reason is that a full formal SSNIP test is often difficult to implement. Indeed, we find that in the retail rental space sector owners of retail space tend to (or have to) conclude individually negotiated long-term contracts with tenants. Thus, in this industry we often lack data on frequent transactions that would enable us to apply a number of statistical techniques in order to predict the anticipated behaviour of tenants in light of a hypothetical price increase."
Source Link Link to Main Source https://doi.org/10.5235/ecj.v7n3.421
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