Monopsony

Monopsony

Monopsony is a market structure in which there is only one buyer for a particular product or service. This gives the buyer significant market power and the ability to dictate terms to sellers.

One example of a monopsony is the labor market in a small town where there is only one major employer. In this situation, the employer can set wages lower than what would be seen in a competitive market because workers have limited options for employment.

Another example of a monopsony is a government that is the sole purchaser of a specific good or service. The government can use its buying power to negotiate lower prices from suppliers, potentially leading to inefficiencies in the market.

In a monopsony market, sellers may be forced to accept lower prices or less favorable terms than they would in a more competitive market. This can lead to decreased production, lower quality products, and reduced innovation.

Overall, monopsonies can have negative effects on both buyers and sellers in the market, as well as on the overall economy.

For more information on monopsony, you can visit Wikipedia.