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Market Power and Inefficiency: A Contracts Perspective

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  • Vickers, John

Abstract

This paper surveys the economics of market power from the perspective of contract theory. Various practices that might be of competition policy concern including price discrimination, quantity discounts, bundling, vertical integration, and contracts with customers -- are discussed in terms of constraints on profit maximization, chiefly arising from incomplete information and credible commitment problems. First, the exploitation of pure monopoly power over final consumers or downstream, firms is discussed. Then motives for anticompetitive behavior towards rival firms are considered, including avoidance of profit dissipation, extraction of rival surplus, and exploitation of customer disunity. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Vickers, John, 1996. "Market Power and Inefficiency: A Contracts Perspective," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 12(4), pages 11-26, Winter.
    • Handle: RePEc:oup:oxford:v:12:y:1996:i:4:p:11-26
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    Cited by:

    1. Eduardo Saavedra, "undated". "Opportunistic Behavior and Legal Disputes in the Chilean Electricity Sector," ILADES-UAH Working Papers inv130, Universidad Alberto Hurtado/School of Economics and Business.
    2. Antonio Nicita & Giovanni Ramello, 2005. "Exclusivity and Antitrust in Media Markets: The Case of Pay-TV in Europe," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(3), pages 371-387.
    3. Julien Forder & Ann Netten, 2000. "The price of placements in residential and nursing home care: the effects of contracts and competition," Health Economics, John Wiley & Sons, Ltd., vol. 9(7), pages 643-657, October.
    4. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    5. Bickenbach, Frank & Kumkar, Lars & Soltwedel, Rüdiger, 1999. "The new institutional economics of antitrust and regulation," Kiel Working Papers 961, Kiel Institute for the World Economy (IfW Kiel).
    6. Michie, Jonathan, 1997. "Network externalities--the economics of universal access," Utilities Policy, Elsevier, vol. 6(4), pages 317-324, December.

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