Buyer's Monopoly

AAA

DEFINITION of 'Buyer's Monopoly'

A buyer's monopoly, or "monopsony", is a market situation where there is only one buyer and many sellers. This situation gives the buyer considerable power to demand concessions from sellers, since the sellers have no alternative to selling to the buyer. Generally, a buyer's monopoly is undesirable. Inefficiencies caused by lack of competition lead to a dead weight loss in the economy as a whole. A monopsony is able to use its market power to capture additional profits for it's owners.

INVESTOPEDIA EXPLAINS 'Buyer's Monopoly'

A single-payer government healthcare system is an example of a buyer's monopoly. Under such a system, the government would be the only buyer of health services. This would give the government considerable power over health care providers. It is sometimes argued that such a system would be advantageous to citizens because a government-controlled buyer's monopoly could gain sufficient market power to drive down the prices charged for healthcare services. Critics claim that a dead weight loss would occur if the quality or availability of health care declined due to the enactment of such a system.

RELATED TERMS
  1. Sherman Antitrust Act

    Anti-monopoly U.S. legislation which attempted to increase economic ...
  2. Monopolistic Competition

    A type of competition within an industry where: 1. All firms ...
  3. Natural Monopoly

    A type of monopoly that exists as a result of the high fixed ...
  4. Legal Monopoly

    A company that is operating as a monopoly under a government ...
  5. Monopsony

    A market similar to a monopoly except that a large buyer not ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
RELATED FAQS
  1. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  2. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  3. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  4. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
  5. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  6. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Early Monopolies: Conquest And Corruption

    This structure can be very effective, but it is also known for its abuse of power.
  2. Personal Finance

    A History Of U.S. Monopolies

    These monoliths helped develop the economy and infrastructure at the expense of competition.
  3. Personal Finance

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  4. Entrepreneurship

    The Giants Of Finance: Andrew Carnegie

    Though not as well-remembered as some of his contemporaries, Andrew Carnegie's legacy is strong and moralistic.
  5. Options & Futures

    The Kingpin Of Wall Street: J.P. Morgan

    From robber baron to the hero of the Panic of 1907, this man helped shape Wall Street as we know it.
  6. Economics

    Understanding the Product Life Cycle

    Product life cycle is the period of time during which a product is conceived and developed, brought to market and eventually removed from the market.
  7. Economics

    What are Barriers to Entry?

    A barrier to entry is any obstacle that restricts or impedes a company’s efforts to enter an industry.
  8. Economics

    Explaining Aggregate Supply

    Aggregate supply is the total supply of goods and services an economy produces in a given time period.
  9. Economics

    What Does Inferior Good Mean?

    The term “inferior good” does not describe a lack of quality, but rather, is an economic term used when discussing elasticity of demand for a good.
  10. Economics

    What Is a Giffen Good?

    A Giffen good is a product whose demand increases as its price increases, and falls when its price falls.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!