Monopsony

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A monopsony is a type of market where there is one buyer and many sellers who compete (in perfect competition) to serve that buyer. A market can be an oligopsony if there are relatively few buyers and many sellers who compete to serve them. A market of the former type can be described as monopsonistic, where the single buyer is called the monopsonist. A market of the latter type can be described as oligopsonistic, where the few buyers are called oligopsonists. In practice, oligopsonies are sometimes referred to with the same language used to describe monopsonies.

The concept of monopsony has parallels with monopoly. The former has only one buyer in a competitively-provided market, while the latter has only one seller in a market where buyers compete. Both involve forms of market power, since a single market participant has influence over the price in the market.

One interesting aspect of monopsonistic markets is that price floors may not affect such markets in the same ways as they affect perfectly competitive markets. In particular, it is possible in a monopsonistic market for price floors to actually raise the quantity of a good sold and increase social surplus.