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The Paradox of the Exclusion of Exploitative Abuse

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  • Bruce Lyons

    () (School of Economics and Centre for Competition Policy, University of East Anglia)

Abstract

Monopoly pricing is a textbook market failure that is taught in the first year of any economics course. The implied welfare loss (or ‘exploitative abuse’) justifies a whole range of competition policy towards cartels, mergers and regulated industries. Yet there is widespread hostility to prosecuting the same exploitative abuse in the textbook monopoly case (i.e. under Article 82EC)! This paper seeks to understand this paradox. I conclude that, while there are important problems with prosecuting Article 82 exploitation cases (because of problems relating to measurement, market dynamics, multi-sided markets and remedy issues), it is important to keep open the possibility of prosecution; for example, in the forthcoming Article 82 Guidelines.

Suggested Citation

  • Bruce Lyons, 2007. "The Paradox of the Exclusion of Exploitative Abuse," Working Papers 08-1, Centre for Competition Policy, University of East Anglia.
  • Handle: RePEc:ccp:wpaper:wp08-01
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    File URL: http://www.ccp.uea.ac.uk/publicfiles/workingpapers/CCP08-1.pdf
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    References listed on IDEAS

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    1. Robert Sugden, 2004. "The Opportunity Criterion: Consumer Sovereignty Without the Assumption of Coherent Preferences," American Economic Review, American Economic Association, vol. 94(4), pages 1014-1033, September.
    2. Xavier Gabaix & David Laibson, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 505-540.
    3. Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 585-637.
    4. Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
    5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    6. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
    7. Spiegler, Ran, 2006. "Competition over agents with boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 1(2), pages 207-231, June.
    8. Chris M. Wilson & Catherine Waddams Price, 2010. "Do consumers switch to the best supplier?," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 647-668, October.
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    More about this item

    Keywords

    exclusionary abuse; exploitative abuse; monopoly pricing; welfare loss;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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