Document Type
Working Paper
Date of This Version
4-15-2016
Keywords
antitrust, monopoly, short selling
JEL Classification
L12, K21
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. Either way, 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. The mechanism is a market based approach to antitrust.
Working Paper Number
1603
Recommended Citation
Baumann, Robert; Engelhardt, Bryan; and Fuller, David L., "Monopoly Power with a Short Selling Constraint" (2016). Economics Department Working Papers. Paper 194.
https://crossworks.holycross.edu/econ_working_papers/194
Included in
Antitrust and Trade Regulation Commons, Industrial Organization Commons, Law and Economics Commons