Monopsony Definition
A monopsony is where there is a sole buyer of a product, but many sellers. This contrasts with the similarly named monopoly, whereby there is only one seller and many buyers.
A market structure defines the economic environment by which a business finds itself in. How much competition is there? What price pressures are there? Where is the competition pricing and pitching its products at? All such questions help us to define market structures including oligopoly, monopoly, and perfect competition.
A monopsony is where there is a sole buyer of a product, but many sellers. This contrasts with the similarly named monopoly, whereby there is only one seller and many buyers.
Perfect Competition is a type of market structure. In short, perfect competition is a market structure whereby there are many firms that sell a similar product.
First-degree price discrimination is where a business charges each customer the maximum they are willing to pay. This price can vary from customer to customer as the business charges the very maximum in order for the customer to purchase their goods.
Price Discrimination is a strategy businesses use to maximise revenue. Sellers charge customers different prices based on the maximum they think a customer is willing to pay.
A market that has Monopolistic structure can be seen as a mixture between a monopoly and perfect competition. Whilst monopoly and perfect competition are at completely different ends of the spectrum; monopolistic competition is somewhere in between.
When looking at the causes of monopoly, it is important to first define what it is. The term monopoly originates from the Ancient Greek language. Monos, meaning “sole”. And Poleo, meaning “sell”. Roughly translated, it means “Sole Seller”. Any person or business who is the only seller in the market could be classified as having a monopoly.
When business charge customers different prices based on their demographic or other characteristic.
Second degree price discrimination is where a firm sells at different prices based on quantity. This may include offers such as buy two, get one free, or 20 percent off when you buy six.
A natural monopoly occurs when there are high fixed costs meaning that it is unprofitable for more than one to be present in the market.
Oligopoly is derived from the Latin ‘olígoi’ – meaning “few”, and ‘pōléō’ – meaning “to sell”. So loosely translated, it means ‘few sellers’. This is a key characteristic of oligopolistic markets as it is defined by a few firms dominating the market.