Monopsonio (Monopsony)

A monopsony is a market situation in which there is a single buyer or dominant entity that exerts significant control over the demand for a particular good or service, while there are multiple suppliers or sellers in the market. In other words, it is the counterpart of a monopoly, where a single seller dominates the market.

Key characteristics of a monopsony:

1. Single Buyer: In a monopsony, there is a single buyer or entity that purchases the majority of products or services in the market.
2. Multiple Sellers: Despite there being several suppliers or sellers in the market, all of them face the same monopsonistic buyer.
3. Market Power: The monopsonistic buyer holds a high degree of market power, enabling them to influence prices and purchase terms in their favor.
4. Unequal Bargaining Power: Since the buyer is the sole entity in the market, they can impose favorable purchasing conditions and negotiate lower prices with suppliers, often resulting in prices lower than they would be in a competitive market.

Monopsonies can have significant effects on the market and on suppliers. They can lead to supplier exploitation, reduced competition, and limited innovation. To address these issues, some jurisdictions have antimonopoly regulations and laws in place to prevent or control monopsonistic situations and promote competition in the market.