Legal Definitions - bilateral monopoly

A bilateral monopoly describes a unique market situation where there is only one seller of a particular good or service and only one buyer for that same good or service. In such a scenario, both the seller (who holds a monopoly) and the buyer (who holds a monopsony) possess significant market power. Instead of prices being determined by typical supply and demand forces, they are often established through direct negotiation between these two powerful entities.

Here are some examples to illustrate this concept:

• Specialized Defense Component: Imagine a scenario where "AeroTech Solutions" is the only company capable of manufacturing a highly specialized, custom-designed navigation system crucial for a new generation of stealth aircraft. Simultaneously, "Global Defense Contractors" is the only company commissioned by the government to build these specific aircraft, making them the sole potential buyer of AeroTech's unique system. In this situation, AeroTech Solutions holds a monopoly on the navigation system, and Global Defense Contractors holds a monopsony for that specific component. The price and quantity of the navigation systems will be determined through direct negotiations between these two companies, as neither has an alternative supplier or buyer.

• Professional Sports League and Player Union: Consider a major professional sports league, such as the National Basketball Association (NBA), which acts as the sole employer for all professional basketball players within its structure. On the other side, the National Basketball Players Association (NBPA) functions as the exclusive bargaining agent for all NBA players, effectively acting as the single seller of player labor. The collective bargaining agreement between the NBA (the single buyer of player services) and the NBPA (the single seller of player services) is a classic example of a bilateral monopoly in the labor market. The terms of employment, salaries, and benefits are negotiated between these two powerful entities.

• Unique Raw Material for Niche Product: Suppose "Deep Earth Mining Co." owns the only known mine containing a rare earth mineral essential for manufacturing a specific type of high-performance battery. "Future Energy Systems" is the only company in the world that has developed the proprietary technology to process and utilize this particular mineral for their groundbreaking battery design, making them the sole buyer. Deep Earth Mining Co. has a monopoly on the supply of this unique mineral, and Future Energy Systems has a monopsony on its purchase. The price, quantity, and long-term supply agreements for this mineral will be the result of direct negotiations between these two companies, as neither can easily turn to other market participants.