The development of decision-making mechanisms under a bilateral monopoly in the mining industry

This thesis focuses on one main issue: how prices are set in the Russian mining industry under conditions of bilateral monopoly. The mining industry is a broad segment of the economy, with thousands of companies and millions of people employed. This makes it essential to understand how price decisions are made within the mining industry, as such decisions influence many aspects of the economy. By nature, the mining industry tends to operate in a monopolistic market, where one decision can influence the majority of other decisions made in the industry. Theory suggests that monopoly and its power can be very complex and could lead to many unpredictable outcomes. However, it has its own advantages, especially when there is a threat from possible competitors in the industry, including those who do not produce similar products but alternatives. Bilateral monopoly, in this case, can create a possibility for an organisation to influence price decisions. Finding the answer to such problem can influence future decisions in the industry and can guide mining organisation when it comes to making a pricing decision.

Investigation of literature and specific data from the industry built an argument, which created a base for the primary data collection. Monotowns, as a structure of the mining organisation, led to the specifics of relationships between citizens of monotowns, organisations and government. Harmonisation of bilateral relations within monotowns underlined the importance of such relationships. However, this does not answer the problem of this thesis. To find out why bilateral relations are important and valued and how such relationships influence price decisions, interviews with Russian mining organisations were conducted. Aiming to find the solution to the problem and fill in the gap in the literature, primary findings could not confirm nor disagree that strategic decisions in the mining industry can only be developed under bilateral monopoly conditions. However, it was found that different approaches under bilateral monopoly conditions could be taken by mining organisations to make important price decisions.