Modern Evidence of Markets

Recent advances in technology and statistics have substantially improved the methods we use to define markets

• Partial Adjustment Approach

  Assume that prices in the same market reach a long-run equilibrium and measure how prices reach that equilibrium.

• Granger Causality Approach

  Determines if prices in one area have a causal effect on prices in another area.

• Residual Demand Approach

  Estimate the residual demand for firms and calculate price elasticities of each firm to determine if a group of firms can profitably raise prices (if price elasticity of residual demand is low enough that the hypothetical price increase brought by the hypotehtical cartel generates profit, then that group constitutes a relevant market)