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Price Squeezes and Imputation Tests on Next Generation Access Networks

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Author Info

  • Henry ERGAS

    (Deloitte)

  • Eric RALPH

    (EKonomics LLC)

  • Emma LANIGAN

    (independent consultant)

Abstract

A vertically integrated firm that wholesales to its retail rivals can, if it has sufficient market power, set the margin between its retail and wholesale prices so as to harm its rivals. Conventionally, an imputation test is used to determine whether such behavior is being undertaken. Such tests are common in electronic communications, and the EC calls for their potentially intensive ex ante application in the supply of NGANs. This paper shows that while imputation tests are helpful analytical tools for understanding the nature of price squeezes, difficulties associated with implementation, which are sharp in an NGAN context, can make them misleading in practice. Instead, price squeezes are best dealt with through the rigorous comparison of expected outcomes, given the alleged anticompetitive behavior, with the outcomes expected in that behavior’s absence. Such analysis is not suited to ex ante application.

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File URL: http://repec.idate.fr/RePEc/idt/journl/CS7804/CS78_ERGAS_RALPH_LANIGAN.pdf
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Bibliographic Info

Article provided by IDATE, Com&Strat dept. in its journal Communications & Strategies.

Volume (Year): 1 (2010)
Issue (Month): 78 (2nd quarter)
Pages: 67-86

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Handle: RePEc:idt:journl:cs7804

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Related research

Keywords: price squeeze; imputation tests; next generation access networks; vertical discrimination; electronic communications; regulation;

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References

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  1. D. Kennet & Eric Ralph, 2007. "Efficient interconnection charges and capacity-based pricing," International Economics and Economic Policy, Springer, vol. 4(2), pages 135-158, August.
  2. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-50, June.
  3. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
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Citations

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Cited by:
  1. Alessandro Avenali & Anna D’Annunzio & Pierfrancesco Reverberi, 2013. "Bundling, Competition and Quality Investment: A Welfare Analysis," Review of Industrial Organization, Springer, vol. 43(3), pages 221-241, November.
  2. Gaudiny, Germain & Saavedra Valenzuela, Claudia, 2012. "Ex-ante margin squeeze tests in the telecommunications industry: What is a reasonable efficient operator? (Revised: December 20, 2012)," 23rd European Regional ITS Conference, Vienna 2012 67955, International Telecommunications Society (ITS).
  3. Gaudin, Germain & Saavedra Valenzuela, Claudia, 2012. "Ex-ante margin squeeze tests in the telecommunications industry: What is a reasonably efficient operator? (Revised: September 6, 2012)," 23rd European Regional ITS Conference, Vienna 2012 62157, International Telecommunications Society (ITS).
  4. Jaunaux, Laure & Lebourges, Marc, 2013. "Economic replicability tests for next-generation access networks," 24th European Regional ITS Conference, Florence 2013 88501, International Telecommunications Society (ITS).

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