Formulating Empirical Questions of Interest

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CHAPTER 2

FORMULATING EMPIRICAL QUESTIONS OF

INTEREST

The first step in designing and performing an empirical study is to

formulate questions of interest. These questions determine the kinds of

data that the economist collects and the design of the econometric

exercise.

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In addition, a well formulated empirical question helps to

ensure that the resulting analysis both builds on the facts of the case and

is relevant to the determination of the issues at hand.

In this chapter, we provide examples of the kinds of empirical

questions that econometric analyses can address in the context of market

definition and market power, merger analysis, damages, and class

certification.

A. Market Definition and Market Power

Market definition and market power are useful concepts when

evaluating competitive effects.

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These two concepts are discussed below

in turn, even though they are interrelated. In fact, the very purpose of

defining an antitrust market is to identify markets that could be subject to

the exercise of market power. It is also the case that the narrower the

antitrust market, all else equal, the more likely that market power will be

detected.

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Market Definition

The antitrust agencies provide guidelines on how to identify relevant

markets—that is, markets that could be subject to the exercise of market

power—when examining the competitive impact of a merger.

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In this

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. The availability of data and appropriate techniques must also be

considered.

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. See, e. g., Steven C. Salop, The Fir st P rinciples Approach to Antitrust,

Kodak, and Antitrust at the Millennium, 68 ANTITRUST L.J. 187, 188

(2000).

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. See U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, HORIZONTAL

MERGER GUIDELINES (2010), availa ble at http://www.ftc.gov/os/2010/08/