Many have heard the word monopoly but have you heard the word monopsony? This word is becoming more commonly used. A monopsony exists when there is a market dominated by a single buyer, giving power to set the price for whatever is being purchased. If there is no competition, the buyer can pay less for what they are purchasing. Demand all comes from this one source. This would be the opposite from a monopoly where the monopoly is about supply; the monopsony is about demand.
Some examples that have been given of monopsonies include major employers in a small town, universal healthcare, and the post office. Some very popular companies such as Wal-Mart, Microsoft and Google have also been called monopsonies.
Can a company be both monopoly and a monopsony? In a white paper about Google, it is suggested that Google’s has a monopolistic hold on search advertising, but also may be considered a monopsony, by restraining digital commerce. Click here to find out more about Google and its stronghold in the technology market.
Monopsony As the Dominant Market Structure of Web 2.o