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date: 30 November 2020

Abstract and Keywords

In theory, a buyer with monopsony power can exclude competitors and increase its power by engaging in predatory buying. The practice involves increasing the price paid for an input above the monopsony price that would otherwise prevail to achieve an anticompetitive effect. A buyer may profit solely by inflicting a loss on suppliers of the input, if it does not compete with input buyers in an output market and lowers input price after competing buyers are excluded. A buyer may also profit if it is a monopolist in an output market and does not compete in that market with competing buyers or competes with at least a group of the same competitors in both the input and output markets, using higher input prices to increase the costs of competing output sellers. But the use of predatory buying as an anticompetitive strategy in these contexts has different economic and legal implications.

Keywords: predatory buying; monopsony; predatory bidding; input market; output market

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