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Some Economics of Abuse of Dominance

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  • John Vickers

Abstract

The paper offers an economic appraisal of selected aspects of EC law and policy towards abuse of dominance (Article 82). After a brief discussion of thresholds for dominance, five theories of exclusionary harm to compeptition are outlined, concerning: predatory pricing, partial exclusion to exploit rivals, divide-and-rule exclusion, leverage of market power, and maintenance of market power. Issues arising in three EC cases on which judgment was given in 2007 are then discussed in the light of these theories: Wanadoo (predatory pricing), British Airways (discounts and rebates), and Microsoft (refusal to supply, tying and bundling). Implications and prospects for the development of better economics-grounded EC law and policy towards abuse of dominance are discussed in conclusion.

Suggested Citation

  • John Vickers, 2007. "Some Economics of Abuse of Dominance," Economics Series Working Papers 376, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:376
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper376.pdf
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    References listed on IDEAS

    as
    1. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
    2. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, April.
    3. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
    4. Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-1145, December.
    5. Chiara Fumagalli & Massimo Motta, 2006. "Exclusive Dealing and Entry, when Buyers Compete," American Economic Review, American Economic Association, vol. 96(3), pages 785-795, June.
    6. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    7. Michael D. Whinston, 2001. "Exclusivity and Tying in U.S. v. Microsoft: What We Know, and Don't Know," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 63-80, Spring.
    8. Choi, Jay Pil & Stefanadis, Christodoulos, 2001. "Tying, Investment, and the Dynamic Leverage Theory," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 52-71, Spring.
    9. Dennis W. Carlton & Michael Waldman, 2002. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 194-220, Summer.
    10. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier.
    11. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    12. John Vickers, 2005. "Abuse of Market Power," Economic Journal, Royal Economic Society, vol. 115(504), pages 244-261, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Monopolization; Abuse of Dominance; Predatory Pricing; Tying; Refusal to Supply;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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