Buyer's Monopoly

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.

BREAKING DOWN '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
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RELATED FAQS
  1. What's the difference between monopoly and monopsony?

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  2. What is a monopoly?

    Monopoly is a fun family game, but in real life, a monopoly can be dangerous to a country's economy. A monopoly occurs when ... Read Answer >>
  3. Are monopolies always bad?

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  4. What are the differences between Ex Works (EXW) and Free On Board (FOB)?

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  5. What are the characteristics of a monopolistic market?

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