1 Price Squeezes in a Regulatory Environment

Abstract: This paper analyzes the relevance and the scope of price squeeze tests in a regulatory environment. We distinguish between three types of ex ante regulation (full, partial or no regulation) to identify the following types of price squeeze: regulatory squeezes, predatory squeezes, and squeezes as foreclosure. We argue that policy makers should use price squeeze tests as an ex post instrument, compatible with the ex ante regulatory environment. Our analysis implies that policy makers should focus on predatory price squeezes. We propose a predatory squeeze test that respects regulatory choices that have been made previously, in contrast with the earlier proposed tests. We extend our framework to ask at which aggregation level predatory price squeeze tests ought to be applied, a much-debated issue in telecommunications