Oligopsony
Categories: Econ
An oligopsony is the reverse of an oligopoly. Rather than a few sellers and lots of buyers, an oligopsony is a few buyers and many sellers.
Like most real-life markets, oligopsonies are far from perfect competition. The case in which there are few consumer-buyers and many goods-sellers isn’t too common, but if we flip the consumers to be the sellers (of their labor) and firms to be buyers (of labor), the idea of an oligopsony makes more sense.
Take Detroit at the peak of it’s automotive factoryness. There were a few buyers of labor in the car market: General Motors, Ford, and Chrysler...and many sellers of labor (all the workers).
What about many sellers of goods, rather than labor? Look no farther than fast food. BK, Mickey D’s, Arby’s, and Wendy’s are a handful of buyers buying up most of the meat in the U.S.
Since oligopsonies dampen the effects of competition, there’s concern over collusion, which is where antitrust laws come into play. The federal government doesn’t want oligopsonies or oligopolies to set prices together behind closed doors; they prefer free-ish market competition.