IDEAS home Printed from https://ideas.repec.org/a/arh/jrujec/v4y2018i2p175-196.html
   My bibliography  Save this article

The curse of antitrust facing bilateral monopoly: Is regulation hopeless?

Author

Listed:
  • Andrey Shastitko

    (Lomonosov Moscow State University, Moscow, Russia)

  • Claude Ménard

    (Centre d’Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Paris, France)

  • Natalia Pavlova

    (Lomonosov Moscow State University, Moscow, Russia)

Abstract

This paper is about the challenges that antitrust authorities face when dealing with bilateral monopolies. The curse of antitrust refers to traps threatening the efficient applicability of antitrust policies in these situations. Standard theories diverge about the attainability of equilibrium under bilateral monopolies but share skepticism about its efficiency if it ever exists. We suggest a different approach, based on transaction cost theory. First, since bilateral monopolies often develop in the upper segment of value chains, misalignment between parties may generate negative externalities. Second, if parties reach an agreement, the impact of the governance mechanism implemented must be assessed beyond the usual parameters of prices and quantities. Indeed, the risk of negative externalities in the absence of appropriate governance increases dramatically when “critical transactions” are at stake. With vertical integration prohibited, second-best alternatives in which antitrust authorities leave room for innovative hybrid governance may allow internalizing externalities while avoiding high switching costs.

Suggested Citation

  • Andrey Shastitko & Claude Ménard & Natalia Pavlova, 2018. "The curse of antitrust facing bilateral monopoly: Is regulation hopeless?," Russian Journal of Economics, ARPHA Platform, vol. 4(2), pages 175-196, June.
    • Handle: RePEc:arh:jrujec:v:4:y:2018:i:2:p:175-196
    DOI: 10.3897/j.ruje.4.27031
    as

    Download full text from publisher

    File URL: https://rujec.org/article/27031/
    Download Restriction: no
    File URL: https://libkey.io/10.3897/j.ruje.4.27031?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mann, Jeoffrey & Wright, Joshua, 2010. "Innovation and the Limits of antitrust," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 99-123.
    2. Ronald H. Coase, 2008. "The Institutional Structure of Production," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 2, pages 31-39, Springer.
    3. Manne, Geoffrey & Wright, Joshua, 2011. "Innovation and the Limits of Antitrust," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    4. Zerbe, Richard Jr. & Bauman, Yoram & Finkle, Aaron, 2006. "An aggregate measure for benefit-cost analysis," Ecological Economics, Elsevier, vol. 58(3), pages 449-461, June.
    5. Avdasheva, Svetlana & Kryuchkova, Polina, 2015. "The ‘reactive’ model of antitrust enforcement: When private interests dictate enforcement actions – The Russian case," International Review of Law and Economics, Elsevier, vol. 43(C), pages 200-208.
    6. A. Shastitko & N. Pavlova., 2017. "Antitrust in bilateral monopoly," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
    7. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    8. Roger Blair & Christina DePasquale, 2011. "Considerations of Countervailing Power," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 137-143, August.
    9. Shastitko, Andrei, 2012. "Errors of I and II Types in Antimonopoly Mergers Control," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 95-117, February.
    10. Anast. Shastitko., 2017. "Companies’ interaction in the markets of joint products in the context of the antitrust law enforcement," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
    11. Blair, Roger D & Kaserman, David L, 1987. "A Note on Bilateral Monopoly and Formula Price Contracts," American Economic Review, American Economic Association, vol. 77(3), pages 460-463, June.
    12. Paul L. Joskow, 2002. "Transaction Cost Economics, Antitrust Rules, and Remedies," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(1), pages 95-116, April.
    13. A. Shastitko., 2016. "On the methodology of institutional studies," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
    14. Shastitko, A. & Pavlova, N., 2017. "Bargaining Power and Market Power: Comparison and Policy Implications," Journal of the New Economic Association, New Economic Association, vol. 34(2), pages 39-57.
    15. Shastitko, Andrei, 2012. "Antitrust in Russia: to Be or not to Be?," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 50-69, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shastitko, Andrey Ye. (Шаститко, Андрей) & Pavlova, Natalia S. (Павлова, Наталья), 2018. "Wide Prospects and Ravines of Competition Policy [Широкие Перспективы И Овраги Конкурентной Политики]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 110-133, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oliver E. Williamson, 2010. "Transaction Cost Economics: The Natural Progression," American Economic Review, American Economic Association, vol. 100(3), pages 673-690, June.
    2. Shastitko, A. & Kurdin, A., 2014. "Protection of Intellectual Property Rights and Competition Policy: Seeking for a Better Balance," Journal of the New Economic Association, New Economic Association, vol. 21(1), pages 111-135.
    3. Andrey Shastitko & Claude Ménard, 2017. "Discrete institutional alternatives: Theoretical and policy issues (Celebrating the 80 th anniversary of Ronald Coase's “Nature of the Firm”)," Post-Print hal-04011898, HAL.
    4. Шаститко А. Е. & Павлова Н. С., 2021. "Антиконкурентные Последствия Антимонопольной Политики: Кейс Мобильных Операторов," Вопросы государственного и муниципального управления // Public administration issues, НИУ ВШЭ, issue 2, pages 7-33.
    5. Richard J. Mccann, 1996. "Environmental Commodities Markets: ‘Messy’ Versus ‘Ideal’ Worlds," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 85-97, July.
    6. Peter Maskell & Mark Lorenzen, 2004. "The Cluster as Market Organisation," Urban Studies, Urban Studies Journal Limited, vol. 41(5-6), pages 991-1009, May.
    7. Zhu, Jialiang & Gu, Jinnan, 2024. "Intensified law enforcement and firm innovation: Evidence from China's antitrust consolidation," China Economic Review, Elsevier, vol. 87(C).
    8. Marco Furlotti, 2007. "There is more to contracts than incompleteness: a review and assessment of empirical research on inter-firm contract design," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 11(1), pages 61-99, March.
    9. Frédéric Marty, 2021. "Competition and Regulatory Challenges in Digital Markets: How to Tackle the Issue of Self-Preferencing?," GREDEG Working Papers 2021-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    10. Thomas W. Hazlett & Joshua D. Wright, 2017. "The Effect of Regulation on Broadband Markets: Evaluating the Empirical Evidence in the FCC’s 2015 “Open Internet” Order," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(4), pages 487-507, June.
    11. Avdasheva, Svetlana (Авдашева, Светлана) & Shastitko, Andrei (Шаститко, Андрей), 2015. "Alleged Infringement: The Time of Announcement Does Matter [Предмет Обвинения: Время Объявления Имеет Значение]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 72-91, February.
    12. Svetlana Avdasheva & Polina Kryuchkova, 2013. "Law And Economics Of Antitrust Enforcement In Russia," HSE Working papers WP BRP 05/PA/2013, National Research University Higher School of Economics.
    13. Joshua Wright, 2011. "Does Antitrust Enforcement in High Tech Markets Benefit Consumers? Stock Price Evidence from FTC v. Intel," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(4), pages 387-404, June.
    14. Ciccotello, Conrad S. & Hornyak, Martin J., 2000. "Cooperation via contract: An analysis of research and development agreements," Journal of Corporate Finance, Elsevier, vol. 6(1), pages 1-24, March.
    15. Diane Dawson & Maria Goddard, 1999. "Long‐term contracts in the NHS: a solution in search of a problem?," Health Economics, John Wiley & Sons, Ltd., vol. 8(8), pages 709-720, December.
    16. Leeson, Peter T., 2005. "Endogenizing fractionalization," Journal of Institutional Economics, Cambridge University Press, vol. 1(1), pages 75-98, June.
    17. Gabriel R.G. Benito & Torben Pedersen & Bent Petersen, 2005. "Export channel dynamics: an empirical investigation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 159-173.
    18. Rita YI MAN LI, 2008. "Nature Of The Firm: A Study On Developers In China And Hong Kong," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(4(6)_Wint).
    19. Lars Sorgard & Andreea Cosnita-Langlais, 2013. "Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?," Post-Print hal-01668416, HAL.
    20. Schmid, Andreas, 2007. "Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina," MPRA Paper 23311, University Library of Munich, Germany, revised 2008.

    More about this item

    Keywords

    antitrust policy; bilateral monopoly; hybrid governance; switching costs; critical transactions; bargaining power.;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arh:jrujec:v:4:y:2018:i:2:p:175-196. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Teodor Georgiev (email available below). General contact details of provider: https://rujec.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.