Decision (part 4): The Commission’s Economic Analysis

Dirk Auer; Truth on the Market

The
Commission’s Chief Economist team outlined its economic reasoning in an article published shortly
after the Android decision was published. The article reveals that the
Commission relied upon three economic papers to support its conclusion that
Google’s tying harmed consumer welfare.

Each of these three papers attempts to address the same basic problem. Ever since the rise of the Chicago-School, it is widely accepted that a monopolist cannot automatically raise its profits by entering an adjacent market (i.e. leveraging its monopoly position), for instance through tying. This has sometimes been called the single-monopoly-profit theory. In more recent years, various scholars have refined this Chicago-School intuition, and identified instances where the theory fails. While the single monopoly profit theory has been criticized in academic circles, it is important to note that the three papers cited by the Commission accept its basic premise. They thus attempt to show why the theory fails in the context of the Google Android case…

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