Monopoly, Monopsony, and Vertical Collusion: Antitrust Policy and Professional Sports

AuthorJames W. Brock,Walter Adams
Published date01 September 1997
DOI10.1177/0003603X9704200308
Date01 September 1997
Subject MatterSymposium: Antitrust in the Sports Industry
The Antitrust Bulletin/Fall 1997 721
Monopoly, monopsony, and vertical
collusion:
antitrust
policy
and
professional sports
BY WALTER ADAMS* and JAMES W. BROCK**
We are all
partners-the
owners, the players,
and
the networks. It is
just
aquestion
of
figuring
out who gets what share
of
the pie.
Bill Giles, President,
Philadelphia Phillies
Economic theory provides asuitable model for analyzing bilateral
monopolies or cartels.
This type
of
market structure is characterized by what Hein-
rich von
Stackelberg
aptly
called
Gleichgewichtslosigkeit-an
incapacity
to
achieve
a
stable
equilibrium.
I
The
inherent
and
irreconcilable
conflict
between
the
bilateral
monopolists
or
* Vernon F. Taylor Distinguished Professor of Economics, Trinity
University (TX) and past president Michigan State University.
** Moeckel Professor of Economics, Miami University (OH).
HEINRICH VON STACKELBERG, MARKTFORM UND GLEICHGEWICHT 100
(1934).
© 1997by Federal Legal Publications. Inc.
722
The antitrust bulletin
cartelists can be rationally resolved (in the best interests of both
parties) only if they agree to enter into a vertical combination or
conspiracy.
Such coalescence, of course, represents a
compromise-a
case
of mutual
forbearance-in
order to jointly maximize profits. And,
says Stackelberg, profits will be maximized for the bilateral part-
ners if, for
example,
in
labor-management
confrontations,
the
employer enjoys amonopoly in the sale of his products. In other
words, market control or market dominance in the product market
serves not only the best interests of management but also the best
interests of labor. Hence abilateral monopoly or cartel naturally
militates toward coalescence of power between management and
labor, not antagonism or countervailance of power.'
It does
not
require hermeneutic
virtuousity
to
demonstrate
that, in their structural organization, their conduct, and their per-
formance, professional sports are a textbook example of a bilat-
eral cartel. Acartel of club owners exercises monopoly power in
the product market and monopsony power in the input market. A
cartel
of
unionized players countervails that monopsony power.
These cartels confront each other in a love/hate, cooperation/con-
flict relationship. Neither is strong enough to exercise total domi-
nance over the other. Rationality dictates astrategy of coalescing
power
to
resolve
the impasse created by countervailing power.
Periodic contests over
"the
division
of
the swag"3 may disturb
their
peaceful
coexistence,
but this
must
never
be
allowed
to
diminish the exercise of their combined power to exploit the com-
munity.
In this article, we shall analyze in broad outline the nature of
the owner cartel, and next the nature
of
the player cartel. Finally,
we shall sketch some of the economic consequences of the tacit
conspiracy in the operation of this bilateral cartel.
2For an analysis of this phenomenon in American industry gener-
ally, including its problematic consequences for government policy, see
Walter
Adams &James W. Brock, Tacit Vertical Collusion
and
the
Labor-Industrial Complex, 62
NEB.
L.
REV.
621 (1983).
3
HENRY
C.
SIMONS,
ECONOMIC
POLICY
FOR A
FREE
SOCIETY
219
(1948).

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