A bilateral monopoly is a market in which one seller faces one buyer, so the outcome depends heavily on bargaining.
Why it is different from ordinary monopoly
In a monopoly, the seller has market power over many buyers. In a monopsony, the buyer has market power over many sellers. In a bilateral monopoly, both sides have power:
- the seller is a monopolist,
- the buyer is a monopsonist.
That means there is usually no single mechanically determined competitive price. Instead, the final price and quantity depend on negotiation, outside options, and institutional rules.
Economic logic
The monopoly side tends to want a higher price. The monopsony side tends to want a lower price. The feasible bargaining range is therefore shaped by each side’s fallback option.
This is why bilateral monopoly is often analyzed with bargaining theory and game theory rather than with supply and demand alone.
Practical examples
Examples can arise in labor markets when a powerful union bargains with a single large employer, or in defense procurement when one government buyer negotiates with one specialized supplier.