Monopsony

Monopsony is a situation in which there is only one buyer for a good or service in a market.[1]

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Economics
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Major Concepts
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Theory

A monopsony is not unlike a monopoly. Whereas a monopoly is the sole supplier, the monopsony is the sole buyer. The idea originated with economist Joan Robinson in her book The Economics of Imperfect Competition published in 1933. In the real world, there are few good examples of pure monopsonists, though they are often associated with company towns. Monopsonists have large amounts of market power and sellers have to accept whatever price they offer.

Minimum wage analysis

In theory a monopsony complicates more simplistic supply and demand models of minimum wage that simply suggest they cause unemployment. Because the firm can increase profits by not employing local workers it is reducing wages and output. Increasing the minimum wage encourages more people to work for it and boosts total output.[2]

See Also
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References
  1. Monopsony. Encyclopedia Brittanica.
  2. Monopsony Economics Online.
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