Monopsony

monopsony

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In economics, a monopsony [muh-nop-suh-nee] is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers. As the only purchaser of a good or service, the ‘monopsonist’ may dictate terms to its suppliers in the same manner that a monopolist controls the market for its buyers.

The term was first introduced by Joan Robinson in her influential book, ‘The Economics of Imperfect Competition.’ Robinson credits classics scholar Bertrand Hallward of Peterhouse College, Cambridge with coining the term. A single-payer universal health care system, in which the government is the only ‘buyer’ of health care services, is an example of a monopsony. It has also been argued that Wal-Mart, in the United States, functions as a monopsony in certain market segments, as its buying power for a given item may dwarf the remaining market. The Canadian Wheat Board, established by the Parliament of Canada in 1935 as a producer marketing system, is a monopsonistic buyer of wheat and barley.

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