Monopsonys Flashcards
What is a monopsony
A monopsony is when there is a single buyer of a good
What impact does a monopsony have
- monopsony’s have bargaining power over suppliers as if they monopsony doesn’t buy from the supplier, there are not many takers
- these monopsony’s can use their bargaining power to negotiate lower prices
- these lower prices decrease the monopsonies costs which allows them to have more profit
What impact does monopsony power have on suppliers
- suppliers are supplying lower prices when compared to competitive conditions - this leads to lower revenue an profit and could mean the suppliers leave the market
- they have pressures to cut costs as they need to be profitable
- tougher non price conditions due to monopsonies power - delayed payments
How can monopsonies be beneficial to suppliers
- a strong relationship with a monopsony can get rid of any uncertainty
- can be lucrative
- can be harmonious
How does the monopsonist benefit themselves
- lower prices compared to competitive conditions - higher revenue and profit - can lead to dynamic efficient
- can receive perks from suppliers
However - due to cost cutting pressures quality may be sacrificed
How are consumers affected
- monopsonies are benefiting from lower costs - these gains can be passed onto the consumer through lower prices
-could receive lower quality goods
How are workers affected
- Suppliers face cost cutting pressures which can lead to people getting sacked
- lower profits - suppliers reduce output - unemployment
How does a monopsony affect consumer welfare
A monopsonies is a single buyer and seller of a good. These monopsonies have bargaining power over suppliers which they use to negotiate lower prices. These lowers prices mean that the monopsonist firms total costs fall which means they are enjoying increased profits. The monopsonist could pass on the lower costs onto the consumer which would have a positive impact on consumer welfare.
However this assumes that price is the determinant of consumer welfare
