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Price Squeezes in a Regulatory Environment

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  • Jan Bouckaert

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  • Frank Verboven

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Abstract

This paper analyzes the relevance and the scope of price squeeze tests in a regulatory environment. We distinguish between three types of ex ante regulation (full, partial or no regulation) to identify regulatory squeezes, predatory squeezes, and squeezes as foreclosure. We argue that policy makers should (i) use price squeeze tests as an ex post instrument, compatible with the ex ante regulatory environment, and (ii) focus on predatory price squeezes. We propose a predatory squeeze test that respects regulatory choices that have been made previously, in contrast with the earlier proposed tests. We extend our framework to ask at which aggregation level predatory price squeeze tests ought to be applied, a much-debated issue in telecommunications. Copyright Kluwer Academic Publishers 2004

Suggested Citation

  • Jan Bouckaert & Frank Verboven, 2004. "Price Squeezes in a Regulatory Environment," Journal of Regulatory Economics, Springer, vol. 26(3), pages 321-351, August.
  • Handle: RePEc:kap:regeco:v:26:y:2004:i:3:p:321-351
    DOI: 10.1007/s11149-004-7554-3
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    References listed on IDEAS

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    1. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, January.
    2. Marcel Canoy & Paul de Bijl & Ron Kemp, 2004. "Access to telecommunications networks," Chapters,in: The Economics of Antitrust and Regulation in Telecommunications, chapter 8 Edward Elgar Publishing.
    3. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier.
    4. Biglaiser, Gary & DeGraba, Patrick, 2001. "Downstream Integration by a Bottleneck Input Supplier Whose Regulated Wholesale Prices Are Above Costs," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 302-315, Summer.
    5. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
    6. Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
    7. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-256, November.
    8. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. van Damme, E.E.C., 2004. "Pragmatic Privatization : The Netherlands 1982-2002," Discussion Paper 2004-007, Tilburg University, Tilburg Law and Economic Center.
    2. Christoph Kleineberg & Thomas Wein, 2015. "Relevance and Detection Problems of Margin Squeeze – The Case of German Gasoline Prices," Working Paper Series in Economics 355, University of Lüneburg, Institute of Economics.
    3. Thomas Wein, 2014. "Preventing Margin Squeeze: An Unsolvable Puzzle for Competition Policy? The Case of the German Gasoline Market," Working Paper Series in Economics 309, University of Lüneburg, Institute of Economics.
    4. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
    5. Justus Haucap & Torben Stühmeier, 2016. "Competition and antitrust in Internet markets," Chapters,in: Handbook on the Economics of the Internet, chapter 9, pages 183-210 Edward Elgar Publishing.
    6. Stennek, Johan & Tangerås, Thomas, 2006. "Competition vs. Regulation in Mobile Telecommunications," Working Paper Series 685, Research Institute of Industrial Economics.
    7. Christoph Kleineberg & Thomas Wein, 2017. "Verdrängungspreise an Tankstellen?," Working Paper Series in Economics 375, University of Lüneburg, Institute of Economics.
    8. repec:oup:jcomle:v:3:y:2007:i:3:p:453-470. is not listed on IDEAS
    9. 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).
    10. 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).
    11. Gaudin, Germain & Saavedra, Claudia, 2014. "Ex ante margin squeeze tests in the telecommunications industry: What is a reasonably efficient operator?," Telecommunications Policy, Elsevier, vol. 38(2), pages 157-172.

    More about this item

    Keywords

    regulation; competition policy; utilities;

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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