Monopsony

A monopsony ( from Ancient Greek μόνος, monos, alone ' and ὀψωνία, opsōnia, Shopping ') describes in economics a market form in which only one demand (eg an employer ) many providers (eg workers ) faces. The term was first used in 1933 by the economist Joan Robinson. The term monopsony also frequently used as a synonym is misleading as a neologism, as the ancient Greek word monopoly literally means exclusive sales.

After a narrow definition there are many providers only a single demand, the monopsonist, facing. According to a broader definition also possible to speak of a monopsony when the buyers can exercise more than usual market influence on the price level. They occur no more than a price taker on the market. While MONOPSONY by the narrow definition hardly be considered real occurring, they are much more likely according to the broad definition.

The monopsony is thus the opposite of monopoly, in which a seller facing many buyers.

Examples

One example is the arms market in a closed economy. In reality, a monopsony is very limited before. With few suppliers and a buyer is also called a limited monopsony. This market structure is often found in tendering procedures in rail transport; there occur a national transportation company on as customers and the railway companies, who apply for the offered traffic contract as a provider.

Examples of monopsony (mostly limited monopsony ) are:

• Common in military products,
• Products for holders of Offer monopolies,
• Products and services to federal agencies,
• Niche products in the aerospace industry (eg European space program ).

Monopsony and labor market

The sequence of monopsonistischer power in the labor market is that wages below the otherwise have on the market adjusting equilibrium price be enforced, resulting in a welfare loss. Explanatory power unfolds otherwise in economics, only a very minor role playing monopsonistic theory, for example, in some countries empirically observed effects of minimum wages that can be captured insufficiently with the standard neoclassical model of the labor market. There, the loss of jobs after the introduction of minimum wages had not occurred in the expected extent. This is explained by the fact that clearly lay by the monopsony wage below productivity and therefore the majority of the workforce could be employed profitably in spite of enforced wage increase. Reasons for the formation of a monopsonistic situation are frictions in the labor market. They arise ( among others ) by:

• Ignorance
• Mobility costs
• Heterogeneous preferences

In the neoclassical model, a wage reduction of only one cent would mean that workers quit their jobs on the spot and engaged in an activity that is as old paid. However, this does not happen in reality. For one thing employees inform not stable over the current wage level, also the data are usually not easy to obtain. If the new job also further away, the cost for the journey, so that a job change is not rational. Heterogeneous preferences ensure that not every vacant workplace will demand the same degree, perhaps because the new work is considered unpleasant. Another possibility for the emergence of employer market power provides the search theory. It assumes that the matching process, ie fill the vacant post, a lot of time needed. As employees find a new job immediately, they also take out a wage that is below that which would accept the neoclassical model.