3.4.6 Monopsony

Monopsony characteristics

• One single buyer in the market

• EG. NHS holding 90% of the healthcare market

• Monopsony power - control price/wage it pays

• Wage makers - doctors, nurses, teachers

• Profit maximisers - minimum costs + paying suppliers as little as possible

• Purchase large portion of the market supply

Costs/benefits of monopsony power

FIRMS - reduced costs of production BUT conflict difficult to manage, supply chain issues (long run driving their suppliers out)

EMPLOYEES - higher wages, BUT ethics/values with the way suppliers are treated.

CONSUMER - lower average costs = lower prices BUT quality may decrease

SUPPLIER - reputation increases, increase sales volume BUT reallocate resources for more profit, may be driven out of business

Occupational immobility

Workers can’t move because they do not have the skills - structural unemployment

Geographical immobility

Workers struggle to move between different areas - labour market failure.