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Price Squeezes in a Regulatory Environment

  • Bouckaert, Jan
  • Verboven, Frank

Regulators have recently shown an increased sensitivity to the issue of price squeezes, especially telecom regulators in European countries. This Paper analyses the relevance and the scope of price squeeze tests as proposed by practitioners and economists, taking the existing regulatory environment as fixed. Based on the degree of existing regulation (full, partial or no) we distinguish between three types of price squeezes: regulatory squeezes, predatory squeezes, and squeezes as foreclosure. We argue that the scope of price squeeze tests is limited to predatory price squeeze tests, to be used in combination with other pieces of evidence as collected in standard predation cases. We propose a predatory squeeze test that respects previously made regulatory choices, in contrast with earlier proposed tests by European practitioners and economists. We extend the framework to ask at which aggregation level predatory price squeeze tests ought to be applied, a much-debated issue in telecommunications.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3824.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3824
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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, June.
  2. Armstrong, M. & Doyle, C. & Vickers, J., 1995. "The access pricing problem: a synthesis," Discussion Paper Series In Economics And Econometrics 9532, Economics Division, School of Social Sciences, University of Southampton.
  3. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  4. repec:dgr:kubcen:199982 is not listed on IDEAS
  5. 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.
  6. Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
  7. repec:dgr:kubtil:2003007 is not listed on IDEAS
  8. 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 302-15, Summer.
  9. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-56, November.
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