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Monopsony in Law and Economics - Roger D. Blair

Monopsony in Law and Economics


Published: 6th September 2010
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Most readers are familiar with the concept of a monopoly. A monopolist is the only seller of a good or service for which there are not good substitutes. Economists and policy makers are concerned about monopolies because they lead to higher prices and lower output. The topic of this book is monopsony, the economic condition in which there is one buyer of a good or service. It is a common misunderstanding that if monopolists raise prices, then monopsonists must lower them. It is true that a monopsonist may force sellers to sell to them at lower prices, but this does not mean consumers are better off as a result. This book explains why monopsonists can be harmful and the way law has developed to respond to these harms.

'Blair and Harrison provide a clear, approachable, and useful analysis of the economics of monopoly on the buying side of markets, a subject that is much too frequently both overlooked and misunderstood. The authors also include a comprehensive, policy-driven analysis of bilateral monopoly and show how monopsony power is exercised in a number of markets, including agriculture, sports leagues, and medical services. This excellent, well-written, and timely book should be on the shelf of every industrial organization economist as well as every competition or antitrust lawyer.' Herbert Hovenkamp, University of Iowa
'Blair and Harrison have written an exhaustive, and probably the definitive, treatment of the law and economics of monopsony. This book explores the issue in depth and also discusses many examples that put the topic easily within the grasp of readers who do not have a background in either law or economics. It is unquestionably the best single source for research on this topic.' Keith N. Hylton, Boston University
'By putting together in a single location and further organizing and developing what we know about monopsony, Blair and Harrison have not only produced a very interesting book, but also done a great service to the profession. This unique monograph includes a detailed treatment of relevant antitrust rules and case law, a thorough but very accessible treatment of relevant economic theory, as well as numerous examples and details of specific industries in which monopsony issues arise in practice. I am sure it will become the standard reference on monopsony, and that I will refer students of economics and antitrust to it for years to come.' Francine LaFontaine, University of Michigan
'This work sets out the fundamental economics of monopsony in a way that will satisfy economists yet is accessible to lawyers. It canvasses the current law on monopsony, taking account of the Supreme Court's provocative case on predatory buying and other recent developments. It contains timely new chapters examining agricultural markets, the NCAA, and physician collective bargaining. The authors' message is that monopsony is more prevalent than many think and not as well understood as it should be. Lucid, comprehensive, and insightful, Monopsony is the definitive treatment of a difficult and overlooked area. It has no good substitute. Serious students of antitrust law and economics will find it indispensable.' John E. Lopatka, Pennsylvania State University and the Dickinson School of Law

Prefacep. xiii
Introductionp. 1
Introductionp. 1
Some Recent Examplesp. 2
Bid Rigging at Antique Auctionsp. 2
Information Sharing at Treasury Auctionsp. 3
American Express and the Boston Fee Partyp. 5
Collusion on Campus: Financial Aidp. 6
Collusion in Baseball's Free Agent Marketp. 8
The Market for College Athletes and Coachesp. 10
Monopsony and Agriculturep. 11
Upheaval in Health Care Marketsp. 12
Plan of the Bookp. 14
The Antitrust Laws and Monopsonistic Forms of Conductp. 16
Introductionp. 16
The Sherman Actp. 17
Agreements in Restraint of Tradep. 17
Monopolization and Attempts to Monopolizep. 20
The Clayton Actp. 22
Price Discriminationp. 23
Tying and Exclusive Dealingp. 24
Mergersp. 27
A Taxonomy of Monopsony Casesp. 29
Collusive Monopsonyp. 30
Single-Firm Conductp. 36
Mergersp. 40
Concluding Remarksp. 40
Economic Theory of Monopsonyp. 41
Introductionp. 41
A Simple Model of Monopsonyp. 41
The Welfare Effects of Monopsonyp. 43
The Effect of Monopsony on Output Pricep. 45
Collusive Monopsonyp. 48
The Economicsp. 48
Conditions Conducive to Collusive Monopsonyp. 49
Organizing and Implementing a Buyer Cartelp. 50
Problems for Collusive Buyersp. 51
Measuring Buying Powerp. 53
The Measurement of Buying Powerp. 54
The Buying Power Index: Pure Monopsonyp. 54
The Buying Power Index: The Dominant Buyerp. 55
The BPI and the Department of Justice Thresholdp. 60
Market Definition and the BPIp. 61
The Buying Power Index in Practicep. 64
Concluding Remarksp. 67
The Antitrust Response to Monopsony and Collusive Monopsonyp. 68
Introductionp. 68
Judicial Assessment of Market Powerp. 69
Monopsony Pricingp. 70
Abuses of Monopsony Powerp. 78
Price Effectsp. 78
Classical Modelp. 78
Inelastic Supply and Perishable Commoditiesp. 79
The Role of Perishabilityp. 81
Welfare Consequences of Collusion in the Context of Inelastic Supplyp. 82
All-or-None Supply Casesp. 83
Nonprice Abusesp. 85
Horizontal Market Divisionp. 85
Bid Riggingp. 86
Refusals to Dealp. 88
Monopsony Leverage and Tyingp. 91
Monopsony and Merger Policyp. 93
Horizontal Mergersp. 93
Vertical Mergersp. 96
Monopsony and Price Discriminationp. 99
Monopsony and Unexploited Scale Economicsp. 101
Different Supply Elasticitiesp. 103
Concluding Remarksp. 104
Cooperative Buying Effortsp. 106
Introductionp. 106
The Theory of Joint Purchasingp. 107
Efficiency-Enhancing Cooperative Buying Venturesp. 108
Enhanced Efficiency and Increased Buying Powerp. 109
Antitrust Responses to Cooperative Buying Effortsp. 113
The Ancillary Restraints Doctrinep. 113
Application of the Ancillary Restraints Doctrine to Efficiency-Producing Buying Agreementsp. 115
Cooperative Buyingp. 115
Product Standardizationp. 117
Northwest Wholesale Stationers and U.S. Department of Justice Guidelinesp. 119
A Structural Dilemmap. 121
Concluding Remarksp. 122
Bilateral Monopolyp. 123
Introductionp. 123
Countervailing Market Power in Antitrustp. 124
The Bilateral Monopoly Muddlep. 126
The Correct Solutionp. 127
A Simple Model of Bilateral Monopolyp. 128
A Formula Price Contract Solutionp. 131
Difficulties with Vertical Integrationp. 131
Vertical Integration by Contractp. 132
Formula Price Contractsp. 133
Performance Characteristicsp. 134
Limitations of Countervailing Power Considerationsp. 136
Transaction Costsp. 136
The Risk of Seller Collusionp. 138
Oligopoly and Oligopsonyp. 140
Concluding Remarksp. 141
Appendix: Price Determination in Bilateral Monopolyp. 142
Monopsony and Antitrust Enforcementp. 146
Introductionp. 146
Private Enforcementp. 146
Antitrust Injuryp. 150
Antitrust Standingp. 152
Applying the Standardsp. 156
Collusive Monopsonyp. 157
Price Fixingp. 157
Market Divisionp. 162
Boycottsp. 163
Monopsonizationp. 163
Nonprice Effortsp. 163
Predatory Pricingp. 164
Mergersp. 166
Price Discriminationp. 167
Concluding Remarks and Measuring Antitrust Damagesp. 168
Monopsony in Action: Agricultural Marketsp. 172
Introductionp. 172
The Monopsony Problemp. 173
Monopsony Power and Contract Powerp. 174
Tying and Reciprocal Dealingp. 179
Alternative Approaches to Agricultural Buying Powerp. 182
Concluding Remarksp. 187
Monopsony in Action: The NCAAp. 188
Introductionp. 188
Introduction to the NCAAp. 188
Collusive Monopsonyp. 189
The NCAA and Collusive Monopsonyp. 190
Organizing Limits on Prices and Quantitiesp. 191
Revenue Sharingp. 194
Sanctions for Cheatingp. 194
Antitrust Challenges to the NCAA Monopsonyp. 196
Walk-on Athletes: In re NCAA I-A Walk-on Football Players Litigationp. 197
Undercompensation: White v. NCAAp. 198
Numbers of Coaches: Hennessey v. NCAAp. 199
Coaches' Compensation: Law v. NCAAp. 201
Concluding Remarksp. 204
Monopsony in Action: Physician Collective Bargaining: Monopoly or Bilateral Monopolyp. 205
Introductionp. 205
Economic Rationale of the State Legislationp. 207
The Effect of Cooperative Bargainingp. 208
Reaction of the Federal Trade Commissionp. 208
Economic Rationale of FTC Concernsp. 211
State Action Doctrinep. 211
Backgroundp. 212
Clear Articulationp. 212
Active State Supervisionp. 213
Information Availablep. 215
Diagnosing Monopsony Powerp. 215
Statutory Guidancep. 216
Monopsony and Monopsony Powerp. 217
Analysis of the Relevant Product (or Service) Marketp. 217
Analysis of the Relevant Geographic Marketp. 218
Measuring Monopsony Powerp. 218
Importance of Entry Barriersp. 220
Implications of the BPIp. 220
Calculating Market Sharesp. 221
Postnegotiation Reviewp. 222
Concluding Remarksp. 222
Final Commentsp. 224
Introductionp. 224
The Evolving Nature of Antitrust Lawp. 224
Issues of Antitrust Injury and Standingp. 225
Cooperative Buying and Bilateral Monopolyp. 228
The Pervasivencss of All-or-None Supplyp. 230
Single-Firm Behaviorp. 231
Bibliographyp. 233
Indexp. 245
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780521762304
ISBN-10: 0521762308
Audience: Tertiary; University or College
Format: Hardcover
Language: English
Number Of Pages: 264
Published: 6th September 2010
Publisher: Cambridge University Press
Country of Publication: GB
Dimensions (cm): 22.8 x 15.2  x 1.9
Weight (kg): 0.48
Edition Number: 2
Edition Type: Revised