The relationship between medical schools and their teaching hospitals involves a complex and variable mixture of monopoly and monopsony power, which has not been previously been ethically analyzed. As a consequence, there is currently no ethical framework to guide leaders of both institutions in the responsible management of this complex power relationship. The authors define these two forms of power and, using economic concepts, analyze the nature of such power in the medical school-teaching hospital relationship, emphasizing the potential for exploitation. Using concepts from both business ethics and medical ethics, the authors analyze the nature of transparency and co-fiduciary responsibility in this relationship. On the basis of both rational self-interest, drawn from business ethics, and co-fiduciary responsibility, drawn from medical ethics, they argue for the centrality of transparency in the medical school-teaching hospital relationship. Understanding the ethics of monopoly and monopsony power is essential for the responsible management of the complex relationship between medical schools and their teaching hospitals and can assist the leadership of academic health centers in carrying out one of their major responsibilities: to prevent the exploitation of monopoly power and monopsony power in this relationship.