DEFINITION of 'Bilateral Monopoly'

A market that has only one supplier and one buyer. The one supplier will tend to act as a monopoly power, and look to charge high prices to the one buyer. The lone buyer will look towards paying a price that is as low as possible. Since both parties have conflicting goals, the two sides must negotiate based on the relative bargaining power of each, with a final price settling in between the two sides's points of maximum profit.

BREAKING DOWN 'Bilateral Monopoly'

Bilateral monopoly systems have most commonly been used by economists to describe the labor markets of industrialized nations in the 1800s and the early 20th century. Large companies would essentially monopolize all the jobs in a single town and use their power to drive wages to lower levels. Workers, to increase their bargaining power, formed labor unions with the ability to strike, and became an equal force at the bargaining table with regard to wages paid.

As capitalism continued to thrive in the U.S. and elsewhere, more companies were competing for the labor force, and the power of a single company to dictate wages decreased substantially. As such, the percentage of workers that are members of a union has fallen, while most new industries have formed without the need for collective bargaining groups among workers.

RELATED TERMS
  1. Buyer's Monopoly

    A buyer's monopoly, or "monopsony", is a market situation where ...
  2. Collective Bargaining

    The process of negotiating the terms of employment between an ...
  3. Natural Monopoly

    A type of monopoly that exists as a result of the high fixed ...
  4. Price Maker

    A monopoly or a firm within monopolistic competition that has ...
  5. Franchised Monopoly

    Monopoly status given by the government to a company. A franchised ...
  6. Legal Monopoly

    A company that is operating as a monopoly under a government ...
Related Articles
  1. Insights

    How & Why Companies Become Monopolies

    Without competition, monopolies can raise prices and lower quality leaving consumers little choice. But monopolies can benefit consumers as well.
  2. Insights

    Unions: Do They Help Or Hurt Workers?

    Learn the pros and cons of these organizations and how they fit into today's economy.
  3. Insights

    A History Of U.S. Monopolies

    These monoliths helped develop the economy and infrastructure at the expense of competition.
  4. Investing

    Analyzing Porter's Five Forces on JPMorgan Chase (JPM)

    Examine the major money-center bank holding firm, JPMorgan Chase & Company, from the perspective of Porter's five forces model for industry analysis.
  5. Investing

    Analyzing Porter's Five Forces on Apple (AAPL)

    Evaluate Apple's position in the marketplace by looking at it through the perspective of the Porter Five Forces Model for industry analysis.
  6. Small Business

    How a Monopoly Works

    In economics, a monopoly occurs when one company is the sole (or nearly sole) provider of a good or service within an industry. This potentially allows that company to become powerful enough ...
  7. Insights

    A History Of U.S. Monopolies

    Here are a few of the most notorious monopolies in U.S. history.
  8. Small Business

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...
  9. Insights

    Will You See Higher Wages In 2015?

    It's been a few years into the economic recovery from the Great Recession, and the employment picture has been rocky.
RELATED FAQS
  1. Are monopolies always bad?

    Learn why governments sanction some monopolies, such as monopolies over public utilities, and why these monopolies are good ... Read Answer >>
  2. What is a monopoly?

    Monopoly is a fun family game, but in real life, a monopoly can be dangerous to a country's economy. A monopoly occurs when ... Read Answer >>
  3. How does a monopoly contribute to market failure?

    Read a simple overview of the theory of market monopoly, where it originated and some contemporary challenges to the classical ... Read Answer >>
  4. What are common examples of monopolistic markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ... Read Answer >>
  5. What are the characteristics of a monopolistic market?

    Learn about monopolistic markets and specific descriptions of the main characteristics that distinguish a monopolistic market ... Read Answer >>
  6. What's the difference between monopoly and monopsony?

    Learn about the difference between a monopoly and a monopsony. Find out how these systems impact the suppliers and consumers ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center