Price correlation and granger causality tests for market definition |
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Authors: | Phillip A Cartwright David R Kamerschen Mei-Ying Huang |
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Institution: | 1. Department of Economics, University of Georgia, USA 2. Department of Economics, National Chung-Hsing University, USA
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Abstract: | The static price correlation test for determining the relevant product and geographic market is critically examined and then extended to (arguably) localized markets for products such as cement, gravel, sand, crushed stone, concrete, and asphalt products. The empirical results lead to the conclusion that the price correlation test is as generally applicable for testing for local markets as it is for testing for citywide or larger markets. The Granger causality model is used alternatively to test market definition empirically. The results suggest that the Granger causality test may be a useful supplement to the price correlation test in delineating markets. |
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