Bargaining Power and Market Power: Comparison and Policy Implications

Modern economic literature fails to provide a clear demarcation line between the concepts of market power, bargaining power and countervailing buyer power. Partly this can be explained by methodological limitations of the existing approaches to analyzing these categories. But the issue cannot be limited to merely a theoretical debate, as the choice of interpretation influences the ways in which antitrust policy is implemented. The issue in question is of special importance in cases of bilateral monopoly. The article aims at providing an approach to differentiate between market power and bargaining power based on results of theoretical differentiating and experimental empirical studies. Such an approach allows us to define bargaining power in a wide and narrow sense, revealing the role of institutional factors and chosen strategies. Bargaining power in its narrow sense excludes the aspects related to market power and represents the institutional characteristics of exchange as well as firms individual strategies of dealing with counterparts on the market. To analyze the different ways in which market power and bargaining power can correspond we study cases of symmetrical and asymmetrical bargaining power without market power, as well as with market power on both sides. We demonstrate that the effects of market power - in terms of both coordination and distribution - can be similar to the effects of asymmetrical bargaining power, which serves as one of the reasons for confusing between the two. The existing trends in Russian antitrust policy demonstrate the need for a balanced approach to assessing actions that disrupt competition and actions explained by asymmetrical bargaining power in the narrow sense.