3.4.6 monopsony

What is a monopsony?

a market situation in which there is only one buyer- monopsonist in market has purchasing power ( exploit purchasing EOS)

What power does monopsonist have

• buying power in market
• meaning can exploit bargaining power with a supplier to negotiate lower prices
• reduced costs purchasing inputs increases potential profit margins

Characteristics and conditions for monopsony to operate?

• A monopsony is a single buyer in a market. (e.g: Network Rail for track maintenance and the government for teachers are examples of a monopsony. Moreover

Cost and benefit to firms of monopsony

• allows buyer to negotiate lower prices for inputs- reducing costs of production
• however- if exploit market power excessively can harm suppliers potentially leading to reduced supply or lower quality supply

Cost and benefit to consumers of monopsony

• may benefit from lower prices for final g/s
• however if monopsony drives suppliers out of buisness it could result in limited variety and potentially increased prices in LR

Cost and benefit to employees

• benefit- offer competitive wages and working conditions due to cheaper inputs
• cost- in cases where monopsony uses power depress wages

Cost and benefit to supplier

• benefit- reliability and stability of monopsony consistent buyer
• cost- lower prices reduced profit margins and less bargaining power