Working Paper: CEPR ID: DP3824
Authors: Jan Bouckaert; Frank Verboven
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: Antitrust policy; Foreclosure; Predation; Price squeeze; Regulation
JEL Codes: L40; L51; L96
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| regulatory environment (G38) | price squeezes (D43) |
| full regulation (G18) | regulatory price squeezes (L11) |
| partial regulation (L51) | predatory pricing (L11) |
| predatory pricing (L11) | influence market structure (D40) |
| absence of regulation (G18) | anti-competitive behavior (L41) |