A PYMNTS Company

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

By  |  February 26, 2020

Dirk Auer; Truth on the Market

    Get the Full Story

    Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required.

    yesSubscribe to our daily newsletter, PYMNTS Today.

    By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions.

    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…

    Continue Reading…