Oligopsony
Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
An oligopsony is a market with a few large buyers and many small sellers. Because the sellers have only a few places to sell, the buyers can push the price they pay below the competitive level. The competitive level is the price a market with many buyers would produce. The few buyers may also coordinate among themselves, which makes the squeeze on sellers worse. It is the buyer-side mirror of an oligopoly.
Example
In some APMC mandis (regulated farm markets), a small group of licensed traders dominates the auctions. If these traders act as a cartel, they can hold down auction prices. Many farmers then get less for their crop than open competition would give them.
Don't confuse with
- Oligopoly: a few sellers facing many buyers. It raises the prices buyers pay. Oligopsony means a few buyers, and it lowers the prices sellers receive.
- Monopsony: exactly one buyer. Oligopsony has a few buyers.