Virtual capacity and competition

Arbeitspapier

In several European merger cases competition authorities have demanded that the merging firm auctions off virtual capacity. The buyer of virtual capacity receives an option on an amount of output at a pre-specified price, typically equal to marginal cost. This output is sold in the market in competition with the merging firm. The paper compares sale of physical and virtual capacity by the merging firm and shows that virtual capacity leads to a less competitive outcome. The merging firm can build up a reputation for producing little, so that the output price increases in the market, and this increases the auction price on virtual capacity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1487

Classification and Topics

• Classification: Wirtschaft ; Auctions ; Monopolization; Horizontal Anticompetitive Practices ; Antitrust Issues and Policies: General
• Subject: virtual capacity ; reputation ; tacit collusion ; antitrust ; mergers ; competition policy ; Kartell ; Übernahme ; Fusion ; Wettbewerbsaufsicht ; Marktanteil ; Wettbewerbspolitik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schultz, Christian
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/18951
• Last update: 10.03.2025, 11:43 AM CET