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- W4787728 abstract "Following deregulation in the formerly monopolized vertically integrated markets, the margin squeeze became one of the major concerns for the competition authorities as well as for the market participants. Nevertheless, this anti-competitive behavior is fiercely debated in the economic and legal literature. Even though the recent case law seems to have established somewhat consistent doctrine how to redress the squeezing abuses, it yet receives very little support from the formal economic modeling. Several existing economic articles analyze the welfare effects of such behavior as well as the effects of banning it, however, their conclusions rest on certain strong assumptions that limit their application in practice. This paper discusses the existing economic theory behind the margin squeeze, as well as its shortcomings. Furthermore, based on the benchmark article of Chone et al. (2010), it offers an extension to their model that allows to look more rigorously at the margin squeeze ban effects in the framework of differentiated products. Indeed, we show that relaxing the assumption of homogenous goods in the retail market changes the model implications. We find that the margin squeeze ban can be actually welfare detrimental if it allows more entry in the market, contrary to what Chone et al. (2010) show, because such entry in our considered framework is less efficient. Likewise, it can also reduce the welfare if it forces the incumbent to withdraw from the retail market. On the other hand, we demonstrate another channel through which the ban could increase the welfare that was not present in Chone et al. (2010), i.e. the reduction of input price that in turn mitigates the double marginalization problem in the vertically related markets in question. The decrease in the input price however can reduce the incentives of a vertically integrated firm to invest upstream, pointing out that the potential positive effects of the ban can be limited." @default.
- W4787728 created "2016-06-24" @default.
- W4787728 creator A5067239940 @default.
- W4787728 date "2011-01-01" @default.
- W4787728 modified "2023-09-23" @default.
- W4787728 title "The Economic Analysis of the Margin Squeeze Ban Effects: An Application to the Market of Differentiated Products" @default.
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- W4787728 doi "https://doi.org/10.2139/ssrn.1971704" @default.
- W4787728 hasPublicationYear "2011" @default.
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