Bilateral monopoly is an expression used in economía to define the conditions of a particular market and what are its two main figures. It is a market governed by a VALUE and for a demandDue to its characteristics, it is a type of market that is easy to identify. It is usually particular to specialized markets.
How is a bilateral monopoly defined?
The definition of bilateral monopoly is understood as the set of conditions that occur in the market through which there is a commercial relationship determined by a single supplier and a single applicant. This single bidder or seller is called monopoly, and the only buyer or claimant is known by the name of monopsony.
The equilibrium of this bilateral monopoly market is always determined by the power of both parties. Therefore, in economic terms, monopsony always ensures that the product, good or service of the monopoly has a cost known as the Marginal cost. Instead, in these same economic terms, the monopolist will always seek to approach what is known as the Marginal Value.
Therefore, when we find ourselves with a bilateral monopoly market we are faced with a market that is in constant negotiation, so that both figures have considerable power over the market itself. The reason? Because based on the ups and downs of their relationship they are able to determine if the price of a product, good or service is higher or lower. Thus, it is a market that is permanently in negotiations, and it is these negotiations that produce price fluctuations, through pressure to reduce prices, for example.
What are the characteristics of a bilateral monopoly?
To better understand the meaning of this type of market, it is necessary to take into account the main characteristics of the bilateral monopoly, in addition to those already mentioned:
- First of all, for there to be a bilateral monopoly, there can only be a single supplier and a single applicant.
- Second, in any bilateral monopoly the negotiating parties will determine how this market works.
- Prices resulting from a bilateral monopoly are generally lower than those from a monopoly.
- Prices resulting from a bilateral monopoly are generally higher than those from a monopsony.