Duhaime's Law Dictionary


Monopsony Definition:

Market conditions in which there exists only one buyer for a commodity or service.

Related Terms: Monopoly, Oligopoly

In the Third Edition of their book Competition and Antitrust Law, authors Facey and Assaf wrote;

"Monopsony is the mirror reflection of monopoly except that in a monopsonistic market there exists only one buyer."

In their 1990 article, University of Florida law professors Blair and Harrison wrote:

"The classical theory of monopsony envisions a market with only one buyer that uses its power to reduce the quantity purchased, thereby reducing the price that the monopsonist has to pay."

In Telecor Communications v. Southwestern Bell, Justice Ebel of the United States Court of Appeals, adopted these words:

"Monopsony is a condition of the market in which there is but one buyer for a particular commodity."

There appears to be a momentum in competition law to prefer a wider definition of monopsony as reflected in these remarks included in the reasons for judgment of Justice Goldberg of the federal Court of Australia in Australian Competition and Consumer Commission and Australian Safeway Stores:

"In the real world, as distinct from the most elementary textbooks, we find that monopoly power is used to dictate terms other than price and similarly, monopsony power is used to extract conditions other than merely the price.... Monopsony power is better defined as a buyer's ability to extract terms more favourable to itself than it could extract in a competitive market.... Monopsony power (is) the power which enabled a buyer to purchase goods for less than the price that would prevail in a competitive market."

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