General Equilibrium in Vertical Market Structures : Monopoly Versus Monopsony

Predatory selling has been evaluated and assessed by antitrust regulators, the courts, and the economics profession. Recently the spotlight has turned to alleged predatory buying. The criteria for determining in output markets whether monopolists or oligopolists are engaged in predatory actions has been debated and various criteria have been expressed both by courts and professional economists. In the case of monopsonists or oligopolists as buyers in input markets, many have argued that the same criteria used to evaluate predatory selling should also hold for predatory buying. Our results demonstrate that the widely used partial equilibrium methodology is not robust. The general or informed equilibrium lens of this paper reveals that the partial equilibrium methodology cannot be relied upon in assessments of monopoly or monopsony whether predatory or not. Our results show that issues in "buy-side" monopsony matters are not simply a mirror image of issues of "sell-side" monopoly matters when related industries or products play a role in equilibrium outcomes. In essence, once the general equilibrium effects of market power are considered, monopoly turns out to be a far more serious concern than monopsony