Duopsony

AAA

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".

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Perfect Competition

    A market structure in which the following five criteria are met: ...
  2. Restaurant Performance Index - ...

    A monthly index tracking the performance of the restaurant industry. ...
  3. Price Fixing

    Establishing the price of a product or service, rather than allowing ...
  4. Oligopsony

    Similar to an oligopoly (few sellers), this is a market in which ...
  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. Does perfect competition exist in the real world?

    First, let's review what economic factors must be present in an industry with perfect competition: 1. All firms sell an ... Read Full Answer >>
  2. For what purpose is the consumer surplus figure used?

    The consumer surplus figure is used by companies that seek to maximize revenue and profits by minimizing consumer surplus, ... Read Full Answer >>
  3. How can the first-in, first-out (FIFO) method be used to minimize taxes?

    The first-in, first-out (FIFO) inventory cost method can be used to minimize taxes during periods of rising prices, since ... Read Full Answer >>
  4. When should a company consider issuing a corporate bond vs. issuing stock?

    A company should consider issuing a corporate bond versus issuing stock after it has already exhausted all internal forms ... Read Full Answer >>
  5. What does it mean to be long or short a derivative?

    A derivative is a type of security in which the price of the security is dependent on one or more underlying assets. A derivative ... Read Full Answer >>
  6. What is an over-the-counter derivative?

    A derivative is a type of security in which the price of the security depends on the price of the underlying asset. Depending ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Trading Strategies

    Setting Vs. Getting: What Is A Price-Taker?

    Learn how the economic term "price taker" may separate investors from traders.
  3. Personal Finance

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  4. Mutual Funds & ETFs

    How To Invest In The Swiss Franc

    The Swiss franc is one of the safe havens of the investing world. Learn how invest through ETFs, forex, futures, and binary options.
  5. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  6. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  7. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.
  8. Investing

    What More Volatility Means For Momentum Stocks

    One byproduct of the recent tick higher in bond yields: a meaningful rise in volatility for both stocks and bonds.
  9. Personal Finance

    Can Electric Cars Replace Gas Guzzlers?

    High costs and poor battery performance have deterred many from switching to electric cars, which begs the question: can electric cars replace gas guzzlers?
  10. Options & Futures

    How & Why Interest Rates Affect Options

    The Fed is expected to change interest rates soon. We explain how a change in interest rates impacts option valuations.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center