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Pricing Benchmark in Market Definition: Theoretical Background and Practical Application

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The definition of the relevant market is one of the most basic underlying concepts of all substantive issues in competition law related to the concentration of enterprises, restrictive agreements and abuse of dominant position. Different methodologies are used for determining the relevant market. What will be applied specifically depends on several factors, the most important including the very nature of a specific product market and data availability. This paper presents the application of methods that are based on the price movement of the products under consideration: correlation, stationarity test (unit root test), cointegration test, and Granger causality test. The aim of the paper is to verify the reliability of these tests in the process of specifying the relevant market. We will demonstrate the practical application of price-based tests on the analysis of monthly time-series data related to the price of three products during the 4-year period.