Research Handbook on the Economics of Antitrust Law

Research Handbook on the Economics of Antitrust Law

Research Handbooks in Law and Economics series

Edited by Einer R. Elhauge

One might mistakenly think that the long tradition of economic analysis in antitrust law would mean there is little new to say. Yet the field is surprisingly dynamic and changing. The specially commissioned chapters in this landmark volume offer a rigorous analysis of the field’s most current and contentious issues.

Chapter 9: Monopsony, Monopsony Power, and Antitrust Policy

Roger D. Blair and Jessica S. Haynes

Subjects: economics and finance, competition policy, law and economics, law - academic, competition and antitrust law, law and economics


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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