monopsony Flashcards
Characteristics
-One single buyer
-Price maker
-Many sellers
-Limited substitute buyers
Costs of monopsony
-Firms lose profits as buyers negotiate lower prices - supermarkets and farmers - pressure to accept lower wages
-Lower wages for employees - coal miners
-Their labour is exploited - however presence of trade unions can prevent this - worse working conditions
-Unproductive if wage is low
-Consumers may receive lower prices - higher CS - more waste - potential worsening of quality
Benefits of monopsony power
-Suppliers can benefit from the stability and reliability of a consistent buyer
-NHS has monopsony power when buying drugs from pharamceutical companies - negotiate lower prices - cover more treatment - saved money used for R+D
-Consumers may benefit from lower prices due to lower input costs
Eval
- Suppliers could potentially improve efficiency - make savings
- Fear of GCA investigating
- Firms may not pass on lower costs to consumers
- Suppliers could diversify / vertically integrate to ensure profits
- Not all firms abuse their power
