What is a Bilateral Monopoly?

A bilateral monopoly occurs when there is only on producer of a good and only one supplier. It means there is a monopsonist and a monopoly, often the monopoly is a Trade Union.

Example of a Bilateral Monopoly

The 1980s coal mining industry is an example of a bilateral monopoly. In many towns the coal mine was the only employer of labour. At the same time there was one supplier of labour from the trade union members.

Diagram

In a perfectly competitive market wage is Wc and quantity Ec

In a monopsony market wage is Wm and quantity Em

When a trade union enters the market they use collective bargaining to achieve the wage Wm+ Tu

Accepting this quantity employed increases to E + T

At (Wm + Tu, E + T) the monopsony employer can pay workers the same wage rate, any higher and the costs significantly increases to attract labour to the market.