DEFINITION of 'Duopsony'

An economic condition, similar to a duopoly, in which there are only two large buyers for a specific product or service. Members of a duopsony have great influence over sellers and can effectively lower market prices for their supplies.

Also known as "buyer's duopoly".

BREAKING DOWN 'Duopsony'

For example, a town only has two operating restaurants. As a result there are only two employment options for waiters and chefs. The restaurant can offer lower wages because the restaurants have less competition for finding employees. The chefs and waiters have no choice but to accept the low pay, unless they choose not to work. This shows that firms that are part of a duopsony have the power not only to lower the cost of supplies, but also to lower the price of labor.

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