The Regulatory Policy Institute Research Group

Market definition and market power in the airport sector: competition from outside the relevant market

The purpose of this note is to draw attention to a generally neglected aspect of assessing market power in the supply of airport services. It develops a point made en passant in a paper written by the current author and George Yarrow for the UK CAA in 20101. The paper stressed that, although it was the standard practice in competition assessments to define substitution possibilities from within a defined market, sources of constraint on market power also arose from substitutable products defined to lie outside the relevant market and that it was the cumulative effect of all the substitution possibilities that determined the own-price elasticity of demand for a product or service.

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