The Hypothetical Monopolist test (HM test) is a test procedure that is recognised by competition authorities. In the USA it is also known as the SSNIP test (Small but Significant, Non-transitory Increase in Price).
It can be used to determine the geographical relevant market, as well as the relevant product market.
The HM test enables clear statements about demand shifts caused by price changes. Using this test, it can be determined whether consumers accept price increases or change their behavior and consume substitutes. If the price increase leads to a negative result, then the substitution products must be included in the relevant market.
Within this test a hypothetical permanent price increase of 5%-10% is simulated to analyse consumer reactions. Based on this, the test allows economists to check if price increases were profitable for suppliers or not.
EE&MC has diverse experiences and implements the most suitable analytical tools to perform the HM test. EE&MC not only uses up to date market structure, customer surveys and consumer demand analysis, we also use specifically developed market simulation models, like the conjoint-analysis.