A monopsony is exists in a market that has only a single buyer. It is similar to a monopoly.

The pricing power that a monopsonist has is similar to that of a monopolist. Rather than increasing prices above the free market level (which reduces the efficiency of the economy as a whole) it keeps them lower (which also has the effect of reducing the efficiency of the economy).

Monopsony is a less common problem than monopoly (perhaps partly because suppliers are better able to lobby regulators to prevent it than consumers are). It is often alleged to be a problem in markets for products sold to consumers by large retailers (such as supermarkets), but sold to the retailers by significantly smaller suppliers.

Copyright © 2005-2016