Price Squeezes as an Exploitative Abuse

Zhijun Chen

Journal of Industrial Economics, 2024, vol. 72, issue 3, 1269-1298

Abstract: The exclusionary theory of price squeezes, commonly debated in courts and among legal scholars, faces significant challenges. This paper introduces an exploitative rationale for price squeezes. A vertically integrated firm can exploit efficiency gains from a downstream competitor, thereby earning more than the monopoly profit, and price squeezing emerges as a necessary condition for such exploitation. Prohibiting price squeezes benefits the competitor and improves production efficiency, but may also lead to unintended, perverse effects. This paper lays an economic foundation for analyzing price squeeze cases and contributes to reconciling the divergence in the case laws between the United States and the European Union.

Date: 2024
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Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

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