Working Paper: CEPR ID: DP5813
Authors: Maite Martinez Granado; Georges Siotis
Abstract: A number of European countries, among which the UK and Spain, have opened up their Directory Enquiry Services (DQs) market to competition. In Spain, both local and foreign firms challenged the incumbent as of April 2003. The latter abused its dominant position by providing an inferior quality version of the (essential) input, namely the subscribers? database. We illustrate how it is possible to quantify the effect of abuse in situation were the entrant has no previous history in the market. We use the UK experience to construct the relevant counterfactual, that is the "but for abuse" scenario. After controlling for relative prices and advertising intensity, we find that one of the foreign entrants achieved a Spanish market share substantially below what it would have obtained in the absence of abuse.
Keywords: abuse of dominance; competition policy; telecommunications
JEL Codes: C22; L41; L96
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Telefónica's actions (L96) | increased costs for new entrants (L11) |
| Telefónica's actions (L96) | decreased quality of inputs for new entrants (L15) |
| increased costs for new entrants + decreased quality of inputs for new entrants (L11) | lower market share for new entrants (L13) |
| Telefónica's abusive practices (L96) | lower market share for new entrants (L13) |
| Telefónica's abusive practices (L96) | higher expected market share for new entrants (in absence of abuse) (L17) |