A SIMPLE DETERMINATE SOLUTION FOR BILATERAL MONOPOLY

Abstract

Many modern microeconomic theory textbooks similarly conclude that the bilateral monopoly equilibrium price and quantity are theoretically indeterminate given the usual assumptions of the theory of the firm; they usually state that additional assumptions about bargaining power or firm behaviour are required for a determinate solution. The past literature on bilateral monopoly generally supports the textbook position with respect to price but not with respect to quantity. For example, von Stackelberg (1952, 182–9) and Fellner (1947, 523–8) argued that quantity is determinate at the joint profit maximizing level for bilateral monopoly between profit maximizing firms which employ “all or none” offers; price, however, must still be determined by relative bargaining power which is unspecified.

Citation

SPINDLER, Z.A. (1974), "A SIMPLE DETERMINATE SOLUTION FOR BILATERAL MONOPOLY", Journal of Economic Studies, Vol. 1 No. 1, pp. 55-64. https://doi.org/10.1108/eb008037