Since a long time price elasticities of demand form part of the standard toolkit of competition analysis. It is an economic concept measuring the responsiveness of the demand for different goods and services to changes in their prices and is widely used in market definition exercises and horizontal merger control. However, although most antitrust practitioners believe to be familiar with the concept, there are some fundamental characteristics of elasticities stemming from the theory of consumer behavior, which are virtually absent from the antitrust literature and many practitioners are hardly aware of. The purpose of this article is to draw the attention to these properties and to underscore their importance for competition analysis.

This book combines practical guidance and theoretical background for analysts using empirical techniques in competition and antitrust investigations. Peter Davis and Eliana Garcés show how to integrate empirical methods, economic theory, and broad evidence about industry in order to provide high-quality, robust empirical work that is tailored to the nature and quality of data available and that can withstand expert and judicial scrutiny. Davis and Garcés describe the toolbox of empirical techniques currently available, explain how to establish the weight of pieces of empirical work, and make some new theoretical contributions. The book consistently evaluates empirical techniques in light of the challenge faced by competition analysts and academics--to provide evidence that can stand up to the review of experts and judges. The book's integrated approach will help analysts clarify the assumptions underlying pieces of empirical work, evaluate those assumptions in light of industry knowledge, and guide future work aimed at understanding whether the assumptions are valid. Throughout, Davis and Garcés work to expand the common ground between practitioners and academics.

The past decade has witnessed remarkable developments in the quantitative analysis of horizontal mergers. Increases in computing power and the quantity and quality of data available have substantially reduced the costs of estimating demand systems using econometric methods. Good estimates of retail demand elasticities can make an important contribution to assessing the potential effects of a manufacturer merger on consumer prices. While estimates of demand relationships can make substantial contributions to merger analysis, it is much like every other area of empirical economics, in that practitioners invariably are forced to confront and resolve a series of difficult econometric and conceptual issues. The purpose of this book is to identify a number of these issues that we believe researchers and practitioners should address, with the ultimate goal of improving the quality of antitrust analysis.