Friday, December 11, 2015
Containerization and the concept of "relevant geographic market"
My earlier post on concentration and market definition (December 8) has led, interestingly, to a number of questions and requests for clarification on the concept of relevant geographic market. I thought I should do this with the help of an example and the graph I attach here.
A market has thus a geographical attribute which is of relevance in determining concentration and competition. For instance, the market of the city where the port is located is fairly captive. But as the port tries to extend its hinterland towards the region, the country or the continent, the market becomes just a potentially targetable market, with more players and thus more competition (see Figure). To give another example: The Shanghai-Hamburg port-to-port market may be highly concentrated, with just a few carriers offering services, but if one were to consider that the market is the door-to-door importation of bicycles made in Wuhan, China, to Paris, France, then the market is highly competitive with many players offering services, using not only those two ports but many others, at both ends of the trade. Simply put, if the market is port-to-port, it can indeed be concentrated; if however the market is door-to-door, including a miscellany of add-on logistics services, it could well be considered as not concentrated at all. HH