Monopsony Definition

A monopsony is a market structure in which there is only one buyer. The single buyer faces no competition from other buyers and can therefore dictate the terms of purchase. Monopsony power often results in lower wages for workers and higher prices for consumers.

In labor markets, a monopsony exists when an employer is the only buyer of workers’ labor. The employer has all the power and can set wages at any level they choose. Workers have little negotiating power and are unlikely to find another job that pays as well or offers the same working conditions. This can result in lower wages and poorer working conditions for employees.

In product markets, a monopsony exists when a single buyer faces no competition from other buyers. The single buyer can dictate the terms of purchase, resulting in higher prices for consumers.