What is a Monopsony?

    Over the course of the year we have learned about a few different types of markets. These types of markets being but not limited to, pure competition, monopoly, oligopoly, and a monopoly. From the usage of the prefix mono, which means one, we can begin to see that a monopsony and a monopoly have similar aspects. To start off, a monopoly is a market where one producer controls the supply of a good or service. A characteristic of a monopoly is that there is a big entry barrier, meaning it is hard for other firms to enter the market. A monopsony on the other hand, is where one buyer controls the market and in doing this, drives down the prices down. Something crucial in understanding how a monopsony is created is the term, factors of production. Factors of production are inputs used in the production of the good or service and this turns an economic profit. In order for a monopsony to take place, the firm must have a lot of power through their factors of production.
    A theoretical example of a monopsony could be a town where coal mining is the main source of work. If other work is not possible, or hard to achieve, the employer would have a monopsony on the labor market. A real example of a monopsony is the tech industry. Cisco and Oracle are the main suppliers of work technology engineers. In this case, it is hard for people of this profession to find other work as there are only two main suppliers. This market does not fully meet the description of a monopsony as there are two firms, however, this example is very close to a true monopsony.
    In a monopsony as there is only one buyer (in theory), workers can form a trade union so that they are not unfairly treated. Union's represent workers and can work to achieve better pay or benefits for workers. A union has power as a union represents all workers in the monopsony. For example, a union can refuse to work until they are payed a demanded salary and this is not uncommon. In summary, a monospony is a market where there is only one buyer, and this buyer controls the market. Additionally, if this buyer is not satisfying their workers, a union can be formed in order to please the workers.