A monopsony is a market structure in which a single buyer faces many sellers, and it is the formal dual of monopoly, a market structure in which a single seller faces many buyers; the defining condition in each case is concentration on one side of the exchange, so that the sole participant on that side holds the market power and the participants on the opposite side must transact with it or not at all. The concept is most commonly applied to labor markets, where the firm is the buyer of labor and the worker is the seller, so that under monopsony a worker offering a specialized type of labor has only one possible employer to which that labor can be sold. This belongs to microeconomics, specifically the theory of market structure and its application to factor and labor markets, and it completes the classification of market forms that would otherwise treat only seller-side concentration.
A monopsony is a market structure in which a single buyer faces many sellers, and it is the formal dual of monopoly, a market structure in which a single seller faces many buyers; the defining condit…