The Structure of the Economy: Bilateral Oligopoly
DEFINITION OF A BILATERAL OLIGOPOLY Models of market structure assume that the demand side is represented by a large number of buyers. The structure of the market, and the assumed market outcomes, depends on the number of suppliers and how they compete. Suppliers either post one price or exploit their knowledge of buyer categories by using price discrimination. Despite the comments about the key role of consumers in determining economic performance, consumers are fairly passive when the discussion focuses on imperfectly-competitive industries. But many markets are not structured this way; the buyers are not passive consumers but large corporations that do not passively accept suppliers’ prices. Net prices are actively negotiated. These markets are often bilateral oligopolies. In a bilateral oligopoly the buyers are not an undifferentiated mass of consumers but rather a small number of purchasing agents or professional buyers representing large purchasers. T