Monopsony
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Monopsony. Defining Monopsony. Monopoly = price setters that are sole sellers of a good or service Monopsony = price setters that are the sole buyers of a good or service Monopsony = single buyer in a market

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Monopsony

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Monopsony

Monopsony


Defining monopsony

Defining Monopsony

  • Monopoly = price setters that are sole sellers of a good or service

  • Monopsony = price setters that are the sole buyers of a good or service

  • Monopsony = single buyer in a market

  • Monopsonies face an upward sloping supply curve: to buy more of a factor (e.g., labor), they must raise the price


Examples

Examples

  • Major League Soccer (sort of)

    • Only buyer of pro soccer labor in US

    • Most players sign contracts with league, not individual teams

  • Wal*Mart (sort of)

    • Only huge buyer of many products, so heavily influences market

  • US Military (sort of)

    • Only buyer of top weapons programs

  • Locally (sort of):

    • BVSD (only major buyer of teacher labor in area)


Defining monopsony1

Defining Monopsony

  • Monopsony graphs work similarly to monopoly graphs, but use supply curve instead of demand curve

  • Marginal Factor Cost (MFC) slopes more steeply than Supply

    • Monopsonies must raise price to increase supply of the factor

    • Increase in price affects all units of the factor supplied

  • Marginal Revenue Product (MRP) still slopes downward

    • MRP = the demand curve for the factor


Monopsony and profit maximizing

Monopsony and Profit Maximizing

  • Monopsonies, like any company, want to buy cheaply

  • All firms will buy quantity of factor where MFC = MRP

  • Monopsonies, though, pay a lower price (“wage” = Wm)

  • What are the implications of monopsony for workers?

  • For the monopsony?


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