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Bilateral Monopoly

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The Palgrave Encyclopedia of Strategic Management

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Abstract

Bilateral monopolies present challenges to private and public managers. In a market characterized by bilateral monopoly, the monopolist has an incentive to curtail production to maximize profit while the monopsonist should use its market power to expand production and lower unit cost. The final price and quantity are determined through a negotiating process that may, in part, depend on the risk preference of the negotiator. Public policy may restrict the ability of a government to take advantage of its monopolist position. A government may, for reasons of political or public interest, subsidize the monopsonist to lower prices, increase supply, or both. A government may also shift the risk of procurement from the monopsonist to the government, decreasing the ability of the government to negotiate on cost and schedule. Finally, laws, rules and regulations may explicitly prohibit the government from exercising monopolist power, even if such an exercise would be of benefit to the taxpayer.

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Authors and Affiliations

  1. DRMI Code 64Mb, Monterey, CA, 93943, USA

    Robert McNab

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  1. Robert McNab
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Correspondence to Robert McNab .

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Editors and Affiliations

  1. Stanford University , Stanford, California, USA

    Mie Augier

  2. Tusher Ctr Intellectual Capital, University of California Tusher Ctr Intellectual Capital, Berkeley, California, USA

    David J. Teece

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McNab, R. (2016). Bilateral Monopoly. In: Augier, M., Teece, D. (eds) The Palgrave Encyclopedia of Strategic Management. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-94848-2_532-1

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  • DOI: https://doi.org/10.1057/978-1-349-94848-2_532-1

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  • Publisher Name: Palgrave Macmillan, London

  • Online ISBN: 978-1-349-94848-2

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