monopsonist

A monopsonist is a market structure characterized by a single buyer and many sellers. This single buyer, the monopsonist, has significant market power because they are the primary purchaser of a particular good or service. Unlike a monopolist who controls supply, a monopsonist influences demand by controlling purchasing decisions. This power allows the monopsonist to dictate terms of trade, including price and quantity, to the numerous sellers.

In a monopsonistic market, sellers are dependent on the monopsonist for their sales. If they choose not to sell to the monopsonist, they may have few or no other viable options. This asymmetry of power can lead to the monopsonist purchasing goods or services at a lower price than would prevail in a competitive market. The quantity purchased by the monopsonist is also typically lower than in a competitive scenario.

The existence of a monopsonist can lead to economic inefficiencies. The lower prices paid can disincentivize production among sellers, potentially leading to less overall output. Economists analyze monopsony to understand how market power on the buyer's side can impact economic welfare, labor markets, and the distribution of income. Examples can sometimes be found in specialized labor markets where a single large employer dominates hiring, or in government procurement for certain defense materials.