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Some Economics of Margin Squeeze

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  • David Spector

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The recent wave of deregulation resulted into a series of cases in which vertically integrated firms, often former public monopolies, were accused of abusively squeezing the margins of their non-integrated competitors by setting high upstream prices and low downstream prices. A margin squeeze can sometimes be viewed as excessive pricing, predatory pricing, refusal to supply, bundling or discrimination, which raises the issue of the consistency of the treatment of various abuses under Article 82. The naïve foreclosure theory of margin squeeze is logically flawed, as the Chicago critique has demonstrated, but several post-Chicago theories of harm allow us to delineate circumstances under which an anticompetitive margin squeeze could occur. These theories, together with the identification of the many factors making procompetitive practices look deceivingly like a squeeze, should be taken into account in order to complement accounting-based squeeze tests.

Suggested Citation

  • David Spector, 2008. "Some Economics of Margin Squeeze," Post-Print halshs-00754307, HAL.
  • Handle: RePEc:hal:journl:halshs-00754307
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    Cited by:

    1. Rey, Patrick & Jullien, Bruno & Saavedra, Claudia, 2014. "The Economics of Margin Squeeze," CEPR Discussion Papers 9905, C.E.P.R. Discussion Papers.
    2. 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).
    3. 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).
    4. 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.

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