The Extent of the Market

The classical theory of the market has direct applicability to empirical market determinations, and the applications are manageable in both their information requirements and their methodology. An empirical study of markets is undertaken, focusing on issues of monopoly. The test of a market used is the similarity of price movements within the market. One method is suggested for establishing a sufficient value of the correlation of first differences to characterize a single market. However, there is no unique criterion: markets can demonstrate every level of interdependence from absolute homogeneity to total independence. Large general market forces bring about a rough concordance of movement of prices that are not closely related by competitive supply and demand forces. Market tests examined include the Department of Justice Merger Guidelines definition of a market and the Horowitz (1981) theory.