A SSNIP Test for Two-sided Markets: The Case of Media

I discuss the design and implementation of a SSNIP test in order toidentify the relevant market in a media market. I argue that in such atwo-sided market the traditional SSNIP test cannot be applied as it isusually conceived but rather should be modified in order to take intoaccount indirect network externalities. I discuss the issues of whichprice the hypothetical monopolist should be thought of as raising, ofwhether we should look at profits changes on only one side or on bothsides of the market and of which feedback among the two sides of themarket we should take into account. I then derive the relevant formulasfor Critical Loss Analysis. These look much uglier than in asingle-sided market but in fact they are easy to calculate as they arestill expressed in terms of elasticities and of current observedmarkups, prices and quantities. Data requirements are however higher asone needs to estimate the matrixes of the own and cross priceelasticities of demand on the two-sides of the market and the matrixesof the network effects. The paper fills a gap in the economicliterature, so much more as market definition in media markets is at thecentre of many recent competition policy and regulation cases around the world.