b) Advantages and disadvantages

b) costs and benefits of a monopsony to firms, consumers, employees, and suppliers

for firms

• advantages of monopsony power

  • lower cost of production

  • control over supplier quality and delivery time

• disadvantages of monopsony power

  • reputational damage for mistreatment

  • may drive suppliers out of business

for employees

• advantages of a monopsony power

  • stable progressions and benefits

  • job security from firm stability

• disadvantages of a monopsony power

  • wage suppression

  • lack of alternatives

for consumers

• advantages of a monopsony power

  • lower prices

  • improved product quality

• disadvantages of a monopsony power

  • eventual price increases as suppliers leave the market

  • reduced product quality

for suppliers

• advantages of a monopsony power

  • improved reputation

  • more sales

• disadvantages of a monopsony power

  • consistently low profits

  • driven out of business