monopsony (L15) Flashcards
monopsony
single buyer of a good or seller eg the government is a monopsony buying military equipment
usually there are a few buyers with monopsony power
what does it mean if a producer has a few buyers
theyd have a significant amount of bargaining power of price and other factors
why would it be advantageous for sellers to sell to monopsonies
monopsonies hold a lot of power since fhey have enormous potential for sales on offer, so theyd receive more demand for their goods than if they sold without the monopsony
why are monosponies able to take advantage of the sellers?
they are able threaten to walk away from the deal since there would be other producers who would agree to their terms so would be able to obtain favourable conditions like lower prices and delayed payments
how can consumers benefit from the presence of monopsony power
monopsonists can counter monopoly power producers which lowers prices for consumers
stake holder analysis: what happens when prices are lowered for suppliers
lower prices compared to competitive conditions, lower profit, more likely to make losses & leave the market
pressure to reduce costs, lower quality
tough non price conditions (extra/delayed payments) , can remove uncertainty
stakeholder analysis: what happens when theres lower prices for monopsonists
lower prices compared to competitive conditions, higher profit, more likely to receive perks eg extra payments from suppliers to ensure their products appear in all stores, quality may fall but they may switch suppliers because of this
stakeholder analysis: how do lower prices affect consumers & workers?
lower prices but supply may be contsrained by lower prices/ choice constrained by suppliers leaving the marker
suppliers reduce output, less workeds are needed, working conditions may worsen to reduce production costs
monopsony power
when a buyer has significant power over suppliers to a small number of sellers in the market
