What is a Bilateral Monopoly?

A market structure where only one supplier and only one buyer exists is a bilateral monopoly. A bilateral monopoly is the combination of a monopoly (a single seller) and a monopsony (a single buyer) in a market. Bilateral monopoly occurs when there is a containment in the market, that is when there is a limited number of market participants or the option to explore other suppliers is costlier than sticking to a single one. In a bilateral market, both the buyer and the seller sell to maximize profits. While the seller has the likelihood of inflating the price of products since he is the only supplier, the buyer will also bargain to the lowest price since the seller has no other buyer to sell to.

Back to: ECONOMIC ANALYSIS & MONETARY POLICY

Why is a Bilateral Monopoly Important?

Bilateral monopolies were the common practice in the labor markets between the 18th and 20th centuries, especially by developed our industrialized nations. Given that there were limited companies at the period, all jobs opportunities tend to be concentrated in a small or contained region so that the companies can drive lower wages. Workers, who also seek high wages try many options to have higher bargaining powers, such as forming labor unions. The two sides (the companies and the workers) must however negotiate based on the relative bargaining powers they both have, the outcome of the negotiations will determine the wages that will be paid. The common example is such companies are mining companies.

Related Topics

• Monopoly
• Bilateral Monopoly
• Duopoly
• Oligopoly
• Oligopsony
• Cartel (Economics)