Monopsony

What is Monopsony?

Monopsony is a market structure where there is only one buyer. This type of market structure can lead to exploitative pricing practices due to the lack of competition from other buyers in the market. In a monopsony market, the single buyer has the power to dictate the price of goods and services, as well as the terms of sale.

Examples of Monopsony

There are many examples of monopsony in the real world. One of the most common examples is the public sector, where the government is the sole buyer of goods and services. Other examples of monopsony include state-owned enterprises, universities, private companies with exclusive contracts, and private employers who are the only buyers in their labor market.

Effects of Monopsony

Monopsony can have a negative effect on both the buyers and sellers in the market. For buyers, monopsony market structures can lead to higher prices, as they have less bargaining power to negotiate lower prices. For sellers, monopsony can lead to exploitative wages and working conditions, as they have limited avenues to negotiate better terms.

Conclusion

Monopsony is a market structure that can have far-reaching consequences for both buyers and sellers. It is important to be aware of its effects in order to ensure that market participants are treated fairly and equitably.

Resources