On the Risks of Using the Sequential Product-Level SSNIP Approach to Identify Relevant Antitrust Markets

In a recent influential paper have criticized the sequential product-level approach to market definition in merger review. They argue that a simultaneous market-level approach to critical loss is more appropriate than a product-level critical loss analysis, because under certain plausible demand scenarios (nonlinear demand functions) the latter could yield the wrong answer on market definition-i.e., excessively broad or narrow markets. We extend their analysis by showing that a sequential product-level approach actually leads to an excessively narrow market definition when the typical nonlinear demand functions used in merger analysis are employed.