Bilateral monopoly
Encyclopedia
In a bilateral monopoly there is both a monopoly
(a single seller) and monopsony
(a single buyer) in the same market.
In such, market price and output will be determined by forces like bargaining power of both buyer and seller. A bilateral monopoly model is often used in situations where the switching costs
of both sides are prohibitively high.
Bilateral monopoly situations are commonly analyzed using the theory of Nash bargaining game
s.
An example of a bilateral monopoly would be when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
(a single seller) and monopsony
Monopsony
In economics, a monopsony is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers...
(a single buyer) in the same market.
In such, market price and output will be determined by forces like bargaining power of both buyer and seller. A bilateral monopoly model is often used in situations where the switching costs
Switching barriers
Switching barriers or switching costs are terms used in microeconomics, strategic management, and marketing to describe any impediment to a customer's changing of suppliers....
of both sides are prohibitively high.
Bilateral monopoly situations are commonly analyzed using the theory of Nash bargaining game
Bargaining problem
The two person bargaining problem is a problem of understanding how two agents should cooperate when non-cooperation leads to Pareto-inefficient results. It is in essence an equilibrium selection problem; Many games have multiple equilibria with varying payoffs for each player, forcing the players...
s.
An example of a bilateral monopoly would be when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).
See also
- Industrial organizationIndustrial organizationIndustrial organization is the field of economics that builds on the theory of the firm in examining the structure of, and boundaries between, firms and markets....
- New institutional economicsNew institutional economicsNew institutional economics is an economic perspective that attempts to extend economics by focusing on the social and legal norms and rules that underlie economic activity.-Overview:...
- Transaction costTransaction costIn economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange . For example, most people, when buying or selling a stock, must pay a commission to their broker; that commission is a transaction cost of doing the stock deal...