The monopsony and the oligopsony they are economic market structures (context where the exchange of goods and services between individuals takes place) that occur when there is imperfect competition within the market.
Imperfect competition occurs when supply and demand that determine product prices are not naturally regulated. In monopsony and oligopsony, prices are set by the buyer (s) (unlike monopoly and oligopoly, where prices are set by sellers).
- Monopsony. Type of market in which there is only one buyer. This buyer is the one who regulates prices and imposes the demands and needs regarding the good or service offered.
For example: In public works, the State is the only buyer compared to several construction firms that offer their services. - Oligopsony. Type of market in which there are very few buyers of a certain good or service. Buyers have some power to regulate the price and characteristics of the product.
For example: In the production of cereals there are many producers, but few firms that buy the product
Characteristics of monopsony
- It is also called: buyer’s monopoly.
- The bidder must adapt to the buyer’s demands to stay in the market.
- These are unique products.
- They are usually goods that are consumed by a specific group or by a certain company.
- It is a type of market contrary to the monopoly (only one seller), although in both cases there is imperfect competition in the market.
Oligopsony characteristics
- The number of bidders is greater than the number of buyers.
- The modifications made by one of the purchasing companies will affect the rest.
- The companies that buy regulate the price agreed between them.
- It usually occurs in the commercialization of homogeneous products.
- It is a type of market contrary to the oligopoly (few sellers), although in both cases there is imperfect competition in the market.
Examples of monopsony
- Public work.
- Heavy weapons industry.
- Special uniforms for firefighters.
Examples of oligopsony
- Planes
- Submarines
- Bulletproof vests
- Manufacturers of auto parts.
- Large supermarkets that buy from small producers.
- In tobacco production, there are many producers but few firms that buy the product.
- In cocoa production, there are many producers but few firms that buy the product.