Portfolio Effects and Merger Control: Full-line Forcing as an Entry Deterrence Strategy
AbstractThe ''portfolio effect theory'' developed by the European Commission in merger control is at the center of a fierce international row with the US authorities who believe that this theory has no economic foundations. This paper aims to provide a counter-argument and shows that full-line forcing may be used by the holder a comprehensive range of products as an entry deterrence device to maintain its monopoly power. However, due to buyer power on the retail market, this will happen only if entry is not profitable for the industry as a whole. The effects on consumer welfare are ambiguous. Full-line forcing will reduce prices in the first period, but as it helps maintaining monopoly power, is harmful in the long-term.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0301010.
Length: 24 pages
Date of creation: 22 Jan 2003
Date of revision:
Note: Type of Document - Pdf; prepared on PC-ScientificWord; to print on Postscript; pages: 24 ; figures: included
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Portfolio effects; competition policy; full-line forcing; entry deterrence.;
Find related papers by JEL classification:
- L4 - Industrial Organization - - Antitrust Issues and Policies
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