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A monopsony (Greek, ‘sole buyer’), in economics, is a market dominated by a single buyer, as opposed to monopoly\'s single seller. A monopsony can have harmful consequences because a monopsonist can change all the prices under its monopsonistic control (for example, prices, raw material, wages, etc.) whenever it wants to vary its purchases by even a single unit. The monopsonist may state any price for purchases, but the quantity supplied at any price will be determined by the sellers\' willingness to sell. Under perfect competition, by contrast, no individual buyer is large enough to affect the market price of anything.
In practice, monopsony is even rarer than monopoly: perhaps the best example is the Central Selling Organization (CSO), the diamond-buying arm of De Beers. Since the 1930s, it has bought up about 80% of the value of world diamond production and then (acting as a monopoly) regulated the amount of diamonds it sold. Its grip has recently been slightly weakened by recalcitrant producers, notably Zaire and Australia, who have sold some of their diamonds outside the CSO. TF
See also oligopsony. |
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