DP4917 A Full Equilibrium Relevant Market Test: Application to Computer Servers

Author(s): Marc Ivaldi, Szabolcs Lörincz
Publication Date: February 2005
Keyword(s): computer servers, differentiated products, relevant market tests
JEL(s): C33, L41, L63
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4917

The paper defines, implements and compares two empirical tests of relevant markets. While the traditional SSNIP test compares an initial industry equilibrium to an out-of-equilibrium situation, the FERM test, our contribution, compares the same initial equilibrium to an other equilibrium outcome. Hence, it is more in line with the behavioural assumptions of the underlying model of industry equilibrium and this can have significant consequences. We define these concepts formally and apply them to the industry of computer servers by estimating a model on a large dataset. We find several smaller relevant markets in the low-end segment of servers.