• A?monopsony?occurs when there is a?single buyer in the market
• A pure monopsony is actually very rare, however there are many cases where there is a?dominant buyer?in an oligopoly or monopoly market structure
  • E.g.?Supermarkets?in the UK?buy the majority of milk?supplied by dairy farmers & collectively act as a monopsony
  • E.g. The?Ministry of Defence?is often a dominant purchaser of?war materials?supplied by UK companies
  • E.g. The?National Health Service?is the dominant purchaser of?nursing labour
• A?monopsonist?has three main characteristics

1. They are wage makers:?this is especially prevalent in industries where the?government is the majority purchaser?of labour e.g. doctors, nurses, teachers, emergency services staff, military personnel
2. They are profit maximisers:?They aim to?minimise their costs & maximise their profits?by?paying suppliers?as little as possible
3. They purchase a?large portion?of the?market supply?provided by sellers

• Consumers frequently cheer?lower prices?as it enables their income to go further. However, lower prices that are generated through?monopsony power?have the potential to?change an entire industry?in the long-run
  • E.g. More than 1,000 dairy farms in the UK have closed since 2013 as supermarkets have exercised their monopsony power?reducing the price, they pay farmers?per litre of milk
  • It is becoming increasingly difficult to?recruit teachers & nurses?as the Government continues to?suppress wages. This is changing the education & healthcare industries

The Costs & Benefits of Monopsony Power