A simple solution algorithm based on SSNIP task on the borders of the commodity market

Abstract

The problem of the boundaries of the commodity market is the central economic issue in most antitrust investigations. Hypothetical monopolist test (abbreviated SSNIP) is considered to be a basic reference method of solving this problem. There are various algorithms for solving the problem about the boundaries of the product market on the basis of SSNIP. The regulatory algorithm of SSNIP is established by the order of FAS of Russia dd. 28.04.2010, which regulates procedure of analysis of the status of competition in the product market. In practice, the regulatory algorithm of SSNIP turns out to be complicated and costly even for a small number of the studied products. Another drawback of the regulatory algorithm of SSNIP - its ambiguity, the blur and the lack of numerical examples demonstrating the transition from initial data to the configuration of the boundaries of the market. This allows in some cases based on the same raw data to form mutually exclusive boundaries of the commodity market which proves to be a source of significant business risks in the practice of antitrust regulation. The paper proposes a modified algorithm of SSNIP to eliminate the main shortcomings of the regulatory algorithm of SSNIP. Namely, to reduce significantly the volume of data requested from respondents, and to prenest a transition from the raw data to the configuration of the boundaries of the market in a compact and transparent table. In the course of formation and processing of the raw data the modified algorithm of SSNIP provides the following distribution of responsibilities between the regulator and the participants of the survey. The regulator generates and delivers to the participants of the survey a list of pairs of goods that are subject to comparison in terms of their substitutability; provides the list of customers and list of vendors involved in the survey; processes the raw data received and presents the results in a standardized tabular form. The survey participants provide in a standardized format raw data for actual and hypothetical sales volumes for each pair of matched products as well as data on price and cost of goods in respect of which an antitrust investigation is conducted. The article presents illustrative numerical examples which allows one to compare normative SSNIP algorithm and proposed modified algorithm of SSNIP.