Monopsony

Question 1

Benefits of monopsony:

Answer 1

• Lower costs and increased profitability- can use EOS
• in theory can be used to treat more people as they can cut the prices of drugs down with purchasing economies of scale. This shifts the MC=AC Curve dowards, increasing the supernormal profit
  (graph for monospony and the AC=MC curve shifting downwards)

Question 2

Monopsony power example

Answer 2

Amazon can demand lower prices, better terms and exclusive delas from manufacturers, wholesalers and destructors. Amazon can dictate fees, commissions and other terms to 3rd party sellers.

Question 3

NHS

Answer 3

NHS procurement system allows it to act as a monopsony in the market for medial equipment and supplies such as dressings and pharmaceuticals. It also acts as a labour market monopsony power.

Question 4

Global food manufacturers

Answer 4

Global food manufacturers often have monopsony power over small-scale farmers in poorer countries- Monstanto- uses patents around GMOs to control seeds and agriculture production, hence has purchasing and price setting power

Question 5

Global food manufacturers - how do they control markets further?

Answer 5

• Small-scale farmers often have limited access to alternative buyers due to geographic isolations, poor infrastructure, and asymmetric market information. This leaves them vulnerable to monopsony exploitation by TNCs who may be their only viable buyer
• Farmers often rely on inputs such as seeds, fertalisers, and pesticides supplied bu the same companies that buy their produce. This vertical integration gives good manufactures even more leverage over farmers

Question 6

Gov intervention against negatives of monopsony:

Answer 6

• Stronger regultion such as the UK Grovery Adjudicator - all grocers with turnover of more than £1 billion are coverd. They investigate commercial relationships and disputes between purchasing and supplies can levy penalties of up to 1%
• Competition policy- regulators may impose conditions or block mergers that would further consolidate monopsony power and harm market participant. (Asda-Sainsbury proposed merger was blocked partially on the monopsony issue)