Monopoly power with a short selling constraint

Robert Baumann (), Bryan Engelhardt and David Fuller

The Quarterly Review of Economics and Finance, 2018, vol. 67, issue C, 8-13

Abstract: We show if a speculator can benefit from reducing a monopoly's rents through short selling, then a speculator may take a short position in a monopoly, overcome the barriers to entry, and compete with the monopoly. The competition drives down the monopoly's rents, and as a result, the short position becomes profitable and covers the cost of entry. If entry is impossible, then the speculator may coordinate and pay the firm's counter-parties to stop trading with the monopoly rather than entering. In either case, increasing a speculator's ability to short a firm's rents results in a constraint on the monopoly and forces it to act more like a price taker. Although we are unaware of such a mechanism being attempted in practice, it does provide a potential market based approach to antitrust regulation.

Keywords: Antitrust; Monopoly; Short selling (search for similar items in EconPapers)
JEL-codes: G18 K21 L12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976917301151
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Monopoly Power with a Short Selling Constraint (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:67:y:2018:i:c:p:8-13

DOI: 10.1016/j.qref.2017.04.002

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().