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Computing abuse related damages in the case of new entry: An illustration for the Directory Enquiry Services market

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  • Siotis, Georges
  • Martínez Granado, María Teresa

Abstract

A number of European countries, among which the UK and Spain, have opened up their Directory Enquiry Services (DQs, or 118AB) market to competition. We analyse the Spanish case, where both local and foreign firms challenged the incumbent as of April 2003. We argue that the incumbent had the ability to abuse its dominant position, and that it was a perfectly rational strategy. In short,the incumbent raised its rivals' costs directly by providing an inferior quality version of the (essential) input, namely the incumbent's subscribers' database. We illustrate how it is possible to quantify the effect of abuse in situation were the entrant has no previous history in the market. To do this, we use the UK experience to construct the relevant counterfactual, that is the "but for abuse" scenario. After controlling for relative prices and advertising intensity, we find that one of the foreign entrants achieved a Spanish market share of only half of what it would have been in the absence of abuse.

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Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2006-02.

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Date of creation: Jul 2006
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Handle: RePEc:ehu:dfaeii:200602

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Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Keywords: competition policy; abuse of dominance; telecommunications;

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