THE INTERPLAY BETWEEN PRICE SQUEEZE AND ACCESS REGULATION1

摘要

In this paper, we analyze the impact of access regulation on a firm's incentive to abuse of its dominant position through a price squeeze. We study the incentive for a vertically-integrated incumbent whose access charge is regulated to undertake a price squeeze in order to foreclose a downstream competitor. An increase in the access charge has two opposite effects: it increases the incumbent's upstream profit when it sells inputs to its competitor, and also lowers the cost of abusing of its dominant position. We show that, when the discount factor is low enough, the latter effect may dominate, and an increase in the access charge can then increase the incumbent's incentive to undertake a price squeeze. This effect may force the regulatory authority to set a large access charge to prevent the incumbent to squeeze its competitor, driving retail prices up and lowering total and consumer surplus. Therefore, a regulatory authority should carefully monitor the welfare effects of its regulation when prohibiting price squeezes.