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The use of the SSNIP (Small but Significant Nontransitory Increase in Price) test presents some difficulties...

The use of the SSNIP (Small but Significant Nontransitory Increase in Price) test presents some difficulties when it is to be used in non-merger investigations. One of the difficulties is referred to as the “cellophane fallacy”. Explain the main argument under the cellophane fallacy.

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Cellophane Fallacy has an argument that even though Monopoly is present it would not have the power to increase the price because increasing the price above the equilibrium price will attract more competitors so that it would not be better off by increasing the price or it does not have the the power to increase the price and maintain a Monopoly at the same time and this is against the Monopoly features and that is the reason why it is considered as a fallacy or a paradox.

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