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Review of Industrial Organization

, Volume 7, Issue 2, pp 241–274 | Cite as

The reverse Cellophane fallacy in market delineation

  • Luke M. Froeb
  • Gregory J. Werden
Article

Abstract

In the landmark Cellophane case, the Supreme Court erroneously concluded that du Pont did not have significant market power because the Court evaluated the elasticity of demand for Cellophane at the monopoly equilibrium, at which the elasticity was far higher than at the competitive equilibrium. The Court's error is commonly referred to as the Cellophane fallacy. This paper contends that there also is a reverse Cellophane fallacy. Markets delineated on the basis of prevailing demand elasticities are likely to be too small and the potential for the exercise of market power is likely to be overstated.

Key words

Market delineation antitrust 

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References

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Copyright information

© Kluwer Academic Publishers 1992

Authors and Affiliations

  • Luke M. Froeb
    • 1
  • Gregory J. Werden
    • 1
  1. 1.Antitrust DivisionU.S. Department of JusticeWashington, D.C.U.S.A.

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