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Market Analysis In The Presence Of Indirect Constraints And Captive Sales

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  • Roman Inderst
  • Tommaso M. Valletti

Abstract

In antitrust cases as well as for regulated industries, the question of how to treat indirect constraint and captive sales correctly has become of major importance in Europe. The (im-)proper treatment of indirect constraints has lead the CFI to overturn the Commission's decision in the proposed merger of Schneider and Legrand. Moreover, with regards to the definition of wholesale broadband access markets, there is an ongoing controversy between the Commission and some National Regulatory Authorities, centering on the question of whether to incorporate indirect constraints already at the stage of market definition. To inform this debate, we present in this article some of the insights from a detailed formal analysis into markets with indirect constraints and captive sales. We show how indirect constraints are appropriately taken into account through the elasticity of derived demand and comment also on the informativeness of concentration measures on both the wholesale and retail market. We further derive insights into when indirect constraints may be more or less important compared with direct constraints. Finally, we also discuss the more practical difficulties that are encountered when analyzing (or estimating) market structures where forward integrated firms also sell to other, competing retail firms.

Suggested Citation

  • Roman Inderst & Tommaso M. Valletti, 2007. "Market Analysis In The Presence Of Indirect Constraints And Captive Sales," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 203-231.
    • Handle: RePEc:oup:jcomle:v:3:y:2007:i:2:p:203-231.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhl025
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    Cited by:

    1. Christos Constantatos & Ioannis Pinopoulos, 2013. "Accommodation effects in successive Cournot Oligopolies," Discussion Paper Series 2013_06, Department of Economics, University of Macedonia, revised Dec 2013.
    2. Inderst, Roman, 2010. "Models of vertical market relations," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 341-344, July.
    3. Ioannis N. Pinopoulos, 2014. "Equilibrium downstream mark-up and upstream free entry," Discussion Paper Series 2014_02, Department of Economics, University of Macedonia, revised Sep 2014.
    4. Manh Cuong Nguyen & Viet Anh Dang & Tri Tri Nguyen, 2023. "The transfer of risk taking along the supply chain," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1341-1378, November.
    5. Ioannis N. Pinopoulos, 2011. "Input foreclosure under alternative entry conditions in the upstream market," Discussion Paper Series 2011_15, Department of Economics, University of Macedonia, revised Nov 2011.
    6. Köhler, Christian & Rammer, Christian, 2012. "Buyer power and suppliers' incentives to innovate," ZEW Discussion Papers 12-058, ZEW - Leibniz Centre for European Economic Research.
    7. Ioannis Pinopoulos, 2014. "Downstream Market Power and the Lerner Index," Discussion Paper Series 2014_07, Department of Economics, University of Macedonia, revised Nov 2014.
    8. Roman Inderst & Tommaso M. Valletti, 2007. "Market Analysis In The Presence Of Indirect Constraints And Captive Sales," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 203-231.
    9. Christos Constantatos & Ioannis N. Pinopoulos, 2021. "On the choice of contract types in vertical relations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 531-538, April.
    10. Mélisande Cardona & Anton Schwarz & B. Yurtoglu & Christine Zulehner, 2009. "Demand estimation and market definition for broadband Internet services," Journal of Regulatory Economics, Springer, vol. 35(1), pages 70-95, February.
    11. Erotokritos Varelas, 2014. "Bank structure and public debt," Discussion Paper Series 2014_06, Department of Economics, University of Macedonia, revised Sep 2014.
    12. Hou, Liyang & Valcke, Peggy & Stevens, David, 2013. "Can open internet access be imposed upon European CATV networks?," Telecommunications Policy, Elsevier, vol. 37(10), pages 970-980.

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    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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