Margin Squeeze in a Regulatory Environment: An Application to Differentiated Product Markets

Petulowa, Marc; Saavedra, Claudia

doi:10.2139/ssrn.2236258

Cited by 5 publications

(1 citation statement)

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“…This feature has a detrimental effect on the profit of the (nonintegrated) traditional retailer. The detrimental effect differs from the standard result in the literature regarding price/margin squeezes, which shows that a ban on price squeezes is always preferable for downstream competitors through lower wholesale prices or higher retail prices (Sidak, 2008;Choné et al, 2010;Petulowa and Saavedra, 2014). Our contrasting result stems from the price-quantity competition.…”

Section: Related Literaturecontrasting

confidence: 69%

Competition between Physical and Electronic Content Retailers

2021

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We investigate a model in which a monopoly supplier distributes two types of its product through a traditional retailer with a wholesale price contract and an online retailer with an agency contract. Because such an agency contract eliminates the double marginalization problem, the online retailer has a cost advantage over the traditional retailer. Given the advantage of the online retailer, we also consider a possible request by the traditional retailer: the retail price of the online retailer is not smaller than the wholesale price for the traditional retailer. We obtain the following results.An increase in the online retailer's bargaining power over the supplier benefits the two retailers but harms the supplier. Under the request to protect the traditional retailer, the wholesale price is strictly higher than that in the baseline model. The retailers' equilibrium prices are also strictly higher than those in the baseline model. The request benefits the supplier and the online retailer, but harms the traditional retailer.

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Section: Related Literaturecontrasting

confidence: 69%

Competition between Physical and Electronic Content Retailers

2021

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Margin squeeze regulation and infrastructure competition

Krämer

Schnurr

2018

Information Economics and Policy

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Equally Efficient Competitor and the Case of Deutsche Telekom: Economic Perspective

Kawashima

Nishimura²

2015

IJEBO

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Abstract:We examine the implication of the assumption in two types of regulatory environments that a new entrant is an equally efficient competitor, on which the price squeeze test is built. Under partial regulation the entrant exits a market because of the higher access rates set by the authority. If we consider this assumption under no regulation, the entrant exits the market by its own inefficiency, and not by the exclusionary strategies of the incumbent. Regardless of the regulatory environments, the incumbent is not responsible for the exit and the assumption is contradictory to the EC decision.

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Margin Squeeze in a Regulatory Environment: An Application to Differentiated Product Markets

Cited by 5 publications

References 10 publications

Competition between Physical and Electronic Content Retailers

Competition between Physical and Electronic Content Retailers

Margin squeeze regulation and infrastructure competition

Equally Efficient Competitor and the Case of Deutsche Telekom: Economic Perspective

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