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Monopsony and two‐part tariffs

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  • Roger D. Blair
  • Christina DePasquale

Abstract

We adapt the traditional model of two‐part tariffs by a monopolist to the case of monopsony. We show that the resulting offer is that the seller pays its producer surplus as an access fee in exchange for the buyer's promise to buy everything that the seller wants to sell when price equals marginal cost. In addition, we show that this is equivalent to the surplus that the buyer captures with first‐degree price discrimination as well as an all‐or‐nothing offer. We also extend this analysis to the case of uncertainty for a risk‐averse monopsonist.

Suggested Citation

  • Roger D. Blair & Christina DePasquale, 2020. "Monopsony and two‐part tariffs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 730-734, July.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:5:p:730-734
    DOI: 10.1002/mde.3132
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    References listed on IDEAS

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    1. E. Zabel, 1970. "Monopoly and Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 37(2), pages 205-219.
    2. Blair,Roger D. & Harrison,Jeffrey L., 2010. "Monopsony in Law and Economics," Cambridge Books, Cambridge University Press, number 9780521746083.
    3. Blair,Roger D. & Harrison,Jeffrey L., 2010. "Monopsony in Law and Economics," Cambridge Books, Cambridge University Press, number 9780521762304.
    4. Herndon, Jill Boylston, 2002. "Health insurer monopsony power: the all-or-none model," Journal of Health Economics, Elsevier, vol. 21(2), pages 197-206, March.
    5. Shaffer Greg, 2005. "Slotting Allowances and Optimal Product Variety," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-28, June.
    6. Roger D. Blair & Christine Piette Durrance, 2014. "Group Purchasing Organizations, Monopsony, and Antitrust Policy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(7), pages 433-443, October.
    7. Leslie M. Marx & Greg Shaffer, 2010. "Slotting Allowances and Scarce Shelf Space," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 575-603, September.
    8. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
    9. Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(1), pages 77-96.
    10. Greg Shaffer, 1991. "Slotting Allowances and Resale Price Maintenance: A Comparison of Facilitating Practices," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 120-135, Spring.
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