Thursday, April 18, 2019

Monopsony and Two-part Tariffs

By: Roger D. BlairChristina DePasquale
Abstract: In his classic article, Walter Oi (1971) analyzed two-part tariffs by a monopolist. We adapt his analysis to the case of monopsony. We show that the resulting offer is that the seller pays its producer surplus as an access fee in exchange for the buyers promise to buy everything that the seller wants to sell when price equals marginal cost. In addition, we show that this is equivalent to the surplus that the buyer captures with first-degree price discrimination as well as an all-or-nothing offer. We also extend this analysis to the case of uncertainty for a risk-averse monopsonist.
Date: 2018–10

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