defineMarketTools-methods {trade}

Methods For Implementing The Hypothetical Monopolist Test

Description

An adaptation of the Hypothetical Monopolist Test described in the 2010 Horizontal Merger Guidelines for use in non-merger settings.

HypoMonTest implements the Hypothetical Monopolist Test for a given ‘ssnip’. ‘...’ may be used to pass arguments to the optimizer.

Usage

## S4 method for signature 'TariffBertrand'
HypoMonTest(object, prodIndex, ssnip = 0.05, ...)

## S4 method for signature 'TariffCournot'
HypoMonTest(object, plantIndex, prodIndex, ssnip = 0.05, ...)

Arguments

object

An instance of one of the classes listed above.

prodIndex

A vector of product indices that are to be placed under the control of the Hypothetical Monopolist.

ssnip

A number between 0 and 1 that equals the threshold for a “Small but Significant and Non-transitory Increase in Price” (SSNIP). Default is .05, or 5%.

...

Pass options to the optimizer used to solve for equilibrium prices.

plantIndex

A vector of plant indices that are to be placed under the control of the Hypothetical Monopolist (Cournot).

Details

HypoMonTest is an implementation of the Hypothetical Monopolist Test on the products indexed by ‘prodIndex’ for a ‘ssnip’. The Hypothetical Monopolist Test determines whether a profit-maximizing Hypothetical Monopolist who controls the products indexed by ‘prodIndex’ would increase the price of at least one of the products in ‘prodIndex’ by a small, significant, and non-transitory amount (i.e. impose a SSNIP). The main difference between this implementation and antitrust::HypoMonTest() is this implementation does not check to see if ‘prodIndex’ contains a merging party's product.

Value

HypoMonTest returns TRUE if a profit-maximizing Hypothetical Monopolist who controls the products indexed by ‘prodIndex’ would increase the price of at least one of the products in ‘prodIndex’ by a ‘ssnip’, and FALSE otherwise.

References

U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines. Washington DC: U.S. Department of Justice, 2010. https://www.justice.gov/atr/horizontal-merger-guidelines-08192010 (accessed July 29, 2011).