3.4.6 Monopsony Flashcards
1
Q
Monopsony definition?
A
When a single buyer controls the market for a particular good/service
Monopolists have a lot of bargaining power
2
Q
Monopsony power definition?
A
When a buyer has a significant amount of power over suppliers to a small number of sellers in the market
3
Q
How are suppliers affected by monopsony power?
A
- Lower prices compared to competitive conditions
- Greater pressure to reduce costs - so quality likely to be reduced
- Tougher non-price conditions often imposed (e.g. delayed payments)
- Opportunity for Long Term contracts with monopsonist buyer = high profits = removed uncertainty
- Relationship between producer/buyer may be harmonious and not exploitative
4
Q
How are monopsonist affected by monopsony power?
A
- ↓ prices = ↑ profit
- More likely to receive perks from suppliers e.g. payments to ensure suppliers products appear in all stores/locations
- ↓ product quality
5
Q
How are consumers affected by monopsony power?
A
- If monopsonist passes on cost savings = ↓ prices and ↑ CS
- Monopsonist can counter firms with monopoly power
- Supply may be constrained due to lower prices
- Choice may be constrained if suppliers are forces out of marker
6
Q
How are workers affected by monopsony power?
A
↓ prices = ↓ output = ↓ workers needed
↓ working conditions to reduce production costs (e.g. not meet NMW, not follow health and safety standards)
