Research Handbooks in Law and Economics series
Edited by Einer R. Elhauge
Roger D. Blair and Jessica S. Haynes* 1 I INTRODUCTION For the most part, antitrust enforcement has focused on monopoly problems – both real and imagined. Whether it was structural monopoly, collusive monopoly (overt or tacit), monopoly leveraging, market foreclosure, or trends in concentration, the focus has largely been on the selling side. Recently, however, some attention has shifted to the buying side and, therefore, to problems of monopsony. Monopsony is the flip-side of monopoly: instead of having a single seller, we have a single buyer in the market. As with pure monopoly, pure monopsony is rare, but its economic equivalent, a buying cartel, is not. Allegations of collusion among buyers have been raised against antique dealers, Major League Baseball owners, the NCAA, hospitals, and bidders for timber harvesting rights, among others. As an antitrust awareness of monopsony problems has grown, it is useful to examine the economics of monopsony. In section II of this chapter, we present and explain various models of monopsony: pure monopsony, collusive monopsony, dominant buyer, and oligopsony. We include a discussion of the social welfare losses associated with monopsony. In section III, we adapt the familiar Lerner Index to monopsony and discuss its significance. In section IV, we turn our attention to antitrust policy. Some final remarks are provided in section V. II MODELS OF MONOPSONY In this section, we present and explain structural and behavioral variants of monopsony. Profit-maximizing behavior will also be presented along with the consequences for social welfare. A Pure Monopsony When...
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