Oligopsony

Oligopsony

Oligopsony is a market structure in which a small number of buyers exert significant control over the prices at which goods or services are bought from numerous sellers. This kind of market power allows the buyers to dictate terms to the sellers, leading to lower prices for the sellers and potentially higher profits for the buyers.

One example of oligopsony is the agricultural industry, where a few large food processing companies can have a significant influence over the prices paid to farmers for their crops. These companies may be able to negotiate lower prices for the crops, leading to decreased profits for the farmers.

In an oligopsonistic market, sellers may have limited options for finding alternative buyers, as the few buyers in the market can collude to keep prices low. This can result in decreased competition, reduced innovation, and ultimately harm the overall economy.

Examples of Oligopsony:

• The diamond industry, where a few large companies control the majority of diamond purchases from miners.
• The tech industry, where a small number of companies control the purchase of components from suppliers.

Learn more about Oligopsony on Wikipedia.