Monopsony

The monopsony is also known within the field of economy as the monopoly buyer . The word is derived from the Greek word mono , which means unique, and psonios, which means purchase. This is a type of market in which we can observe a single buyer and a large number of them are not observed. This is one of the reasons that makes this type of monopoly  imperfect and full of problems.

The plaintiff is the one who is in charge at all times of setting the prices of the goods or services that are offered since it is he who has the power within the market and the bidders are forced to adapt to the demands that he presents. For this reason, the buyer manages to have a greater value in the transactions he carries out. The monopsonio is a condition in the market where the absolute demand for a product is then exerted by a single buyer . It generally occurs when there are some production factors that demand a certain type of specialized work, or with raw materials and goods in process.

Characteristics of monopsony

• It is a marketing structure in which there is a single plaintiff and a single buyer .
• The monopsony has different types of bidders to make bids .
• It is a type of market classified as very imperfect and sometimes full of problems between buyers and sellers .
• The sole applicant is faced with a positive supply curve, so he can price quite high depending on the product he offers.
• Within this type of market you can buy the amount of products you want at the current price without being able to influence that already established price.
• Another important characteristic is that the greater the elasticity that is present in the supply of a certain product, the lower its ability to affect the price.
• There is a fairly close relationship between monopoly and monopsony because a monopoly company will very easily become the sole buyer of many products, mainly products such as raw materials, semi-finished products and other inputs.

Advantages of monopsony

• The greater the elasticity that occurs within the supply, the less it has the ability to affect the price of the product.
• The plaintiff, being unique, can set its price in the market, which is why it can get to seize part of the surplus of the offeror .
• It can exert great control over the market and can depress product prices to obtain extraordinary profits.
• The prices, demands and needs will be dictated and regulated by the buyer .

Disadvantages of monopsony

• The monopsony generates inefficiency in the market because the amount of demand and price are below equilibrium in a market of perfect competition .
• The demand curve of a buyer has a negative slope since as more units are consumed, the valuation given to them is lower.
• When a monopsonist wants to buy an additional unit, he will need to increase the price not only of that item, but also of the ones he already owns.
• The monopsonists can buy the amount they want at the current price, without being able to influence it.
• The types of monopsonies only occur in relatively small local markets or in circumstances where governments intervene.

Examples of monopsony

An example of monopsony can be found in Japan . Car seat manufacturers have a small number of buyers, there are very few Japanese car assembly companies, so they can control the quantities and prices of car seats, since they are the only buyers in the country of this product.

In Northwestern Europe , it can be seen that food can only be obtained by 4 or 5 large supermarket chains . In all the countries throughout Europe, the common thing is to observe large chains that sell basic food products and extending their branches towards electronic products, clothing, medicines, books and toys, among others.

Many companies in China , with thousands of employees, work hard to keep shelves full of products at large chains like Walmart.

In Sweden , for example, minority producers have had to sell their products through a larger chain of supermarkets in order to distribute them, considering that supermarkets can buy their goods anywhere in the world.