In fact, the case of symbiotic production with independent markets is equivalent to that of two bilateral monopolies.
Because markets are independent, under the symmetric case with two identical firms, the market structure is equivalent to that of two separated bilateral monopolies:
Bilateral monopolies tend to raise transaction costs and encourage unproductive strategic behavior.
The mere threat of exit is powerful enough that it enables tenants to free ride or shirk obligation and thereby exacerbates many of the problems implicit in bilateral monopolies. In addition, the available information about formal agreements between co-tenants in identity property suggests that its holders willingly sacrifice exit and the opportunity for financial profit to increase the odds that they will continue to own the property.
Coasean markets behave like bilateral monopolies in the sense that within them price is indeterminate.
Transaction cost analysis can play a major role in the assessment of Coasean markets (bilateral monopolies) where double marginalization is threatened.
If a manufacturer can charge different wholesale-prices to different retailers--if it can price discriminate between them--then a multiple-retailer channel may be conceptualized as a set of
bilateral monopolies within which channel coordination is optimal.
Just compensation and
bilateral monopolies are the keys here.
This can at least partially explain why in many situations public utilities represent cases of
bilateral monopolies. Within this framework, firm's incentives as regards cost-reducing investments may be completely different: unlike previous models of price regulation, within a bargaining scheme a firm might overinvest, to affect the regulator's threat point.
There are three principal types of asset specificity that compartmentalize industries into bilateral monopolies and oligopolies.
These bilateral monopolies exist despite the apparent presence of dozens of buyers and sellers.
As table 1 shows, vertical collusion between
bilateral monopolies has been extraordinarily remunerative for the players in this respect.