Regulation to Offset Market Power of Sellers or Buyers
In chapter 7, we considered how monopolies and monopsonies would try to force changes in the price and quantity to move the market to their advantage, but at an even greater cost to the other side of the market. Again, this is not simply an equity concern that one party is getting most of the surplus created by the market (although that may be a legitimate concern) but rather the exertion of market power results in a net loss in total social surplus.
Seller competition is not only helpful in lowering prices and increasing volume and consumer surplus, but firms also compete in terms of product differentiation. When a monopoly or oligopoly emerges and the seller(s) have a sustainable arrangement ...
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