Price Squeezes in a Regulatory Environment

38 Pages Posted: 8 May 2003

See all articles by Jan Bouckaert

Jan Bouckaert

University of Antwerp - Department of Economics

Frank Verboven

Catholic University of Leuven (KUL) - Department of Applied Economics; Centre for Economic Policy Research (CEPR)

Date Written: February 2003

Abstract

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.

Keywords: Price squeeze, foreclosure, predation, regulation, antitrust policy

JEL Classification: L40, L51, L96

Suggested Citation

Bouckaert, Jan and Verboven, Frank, Price Squeezes in a Regulatory Environment (February 2003). Available at SSRN: https://ssrn.com/abstract=405122

Jan Bouckaert (Contact Author)

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium
+32 3 220 4055 (Phone)

Frank Verboven

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 1 632 6944 (Phone)
+32 1 632 6732 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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