Oligopsony Definition

Oligopsony is an economic market structure in which a small number of buyers control the market for a good or service. The term is typically used in reference to labor markets, where a few large employers have significant power over workers’ wages and working conditions.

In an oligopsony labor market, workers have little bargaining power and must accept the wages and working conditions offered by the employer. Employers are able to pay lower wages and offer fewer benefits because they know that workers have few alternatives.

Oligopsony markets are characterized by high barriers to entry, which keep new firms from entering the market and competing with the existing firms. This lack of competition results in higher prices for consumers and reduced innovation.

While oligopsony markets can be found in many industries, they are most common in industries where there are high costs associated with starting a new business, such as the airline industry. Oligopsony markets can also occur when there is a small number of buyers for a good or service, such as in the market for diamonds.