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What is Monopsony and its examples ?

Definition of Monopsony

Information on definition of monopsony and its examples is given below. Monopsony is a market condition in which a single buyer substantially controls the market as a major purchaser of services or goods offered by many sellers in the market. Monopsony is one of the important concept in economics but it has both advantages and disadvantages in the over all market structures. Monopsony also has imperfect market condition.

Examples of Monopsony are :

  • Electricity generators can negotiate lower price for gas supply contracts and coal
  • Food retailers in market have power when purchasing supplies from milk producers, farmers, and other kinds of suppliers.
  • Monopsony exist in both labour and product market, many companies has a bargaining power while hiring labour.
  • The profit margin of industries increases with the reduced cost of purchasing input.
  • Pharamceuticals or engineering industries has a bargaining power over raw materials available in local market.
  • It is important to study advantages and the disadvantages of monopsony to understand market condition.
  • Monopsony improves the value for money, it lowers the cost for almost all goods and services.

 

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