Monopsony

When owners of major league baseball teams collude in dealing with free agents, when universities meet to avoid a bidding war for the most desirable students, when large manufacturing or processing facilities fix purchase prices of raw materials at artificially low levels, and when dealers rig the bids in public auctions, monopsony power is being exercised. Drawing on microeconomic theory and antitrust law, this broad-ranging work explores the implications of monopsony, or buying power, for antitrust policy. Roger Blair and Jeffrey Harrison argue that monopsony is more prevalent than usually supposed. Here they offer a systematic treatment of the topic, demonstrating that whether monopsony power exists because of a dominant buyer or collusion among buyers, it can cause social welfare losses analogous to those occasioned by monopoly . Blair and Harrison demonstrate that monopsony affects all areas of antitrust policy, including the law of monopolization, collusion, and merger policy. In so doing, they develop several policy tools, such as a "Buying Power Index" and a guide to its practical application. They also discuss bilateral monopoly and offer a principled basis for distinguishing between socially desirable and undesirable cooperative buying.