Monopsony

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A monopsony (from the ancient Greek μόνος, monos , 'individually' and ὀψωνία, opsōnia , 'purchase') describes a market form in economics in which only one buyer (e.g. an employer ) has many suppliers (e.g. employees ) faces. The term was first used in 1933 by the economist Joan Robinson . The term also frequently used as a synonym monopsony is a neologism misleading, as the ancient Greek word monopoly literally alone ver purchase means.

According to a narrow definition, many providers face only one single customer, the monopsonist . According to a broader definition, one can also speak of a monopsony if the customer can exert more influence on the price than is customary in the market. You will then no longer act as price takers in the market. While monopsons are assessed as hardly occurring real according to the narrow definition, they are much more likely according to the broad definition.

The monopsony is thus the opposite of the monopoly , in which a supplier faces many buyers.

Examples

In reality, a monopsony only occurs to a very limited extent. Usually it is an oligopsony with few suppliers but several buyers. In the case of a few suppliers and one customer, one speaks of a limited monopsony . A theoretical example is the regulated armaments market in a (actually nonexistent) closed economy .

The market form of the oligopson is often found in tendering procedures in local rail passenger transport ; There, a national transport company act as the customer and the railway companies that apply for the offered transport contract act as providers.

Examples of monopsones (mostly restricted monopsones) are:

  • often with military products,
  • Products for holders of supply monopolies,
  • Products and services for state and federal authorities,
  • Niche products in the space industry (e.g. European space program).

Monopsony and the labor market

The consequence of monopsonistic power in the labor market is that wages below the equilibrium price that would otherwise be established on the market are enforced, which leads to a loss of welfare . The monopsonistic theory , which otherwise plays only a very subordinate role in economics, develops explanatory power, for example for the empirically determined effects of minimum wages in some countries , which cannot be adequately captured with the usual neoclassical model of the labor market. There, the reduction in jobs after the introduction of minimum wages did not occur to the expected extent. This is explained by the fact that the monopsony meant that wages were well below productivity and that the majority of the workforce can therefore continue to be employed profitably despite the forced wage increase. The reasons for the development of a monopsonistic situation are frictions on the labor market. They arise (among other things) through:

In the neoclassical model, a wage cut of just one cent would mean workers quit their jobs on the spot and go to work that pays like the old one. However, this does not happen in reality. On the one hand, employees do not get constant information about the current wage level, and the data is usually not easy to obtain. If the new job is further away, the travel costs increase, so that a change of job is not rational. Heterogeneous preferences ensure that not every vacant job is in the same amount of demand, for example because the new job is considered more unpleasant. Another possibility for the emergence of employer market power is addiction theory. She assumes that the matching process, i.e. filling the vacancy, will take a long time. Since workers do not find a new job immediately, they also accept wages that are below what the neoclassical model would assume.

literature

  • Card, David and Alan B. Krueger (1995): Myth and Measurement: The new Economics of the Minimum Wage , Princeton University Press, p. 369 ff.
  • OECD (1998): OECD Employment Outlook 1998 , OECD Publishing, Paris, p. 43 f. See online
  • Ragacs, Christian (2002): Why Minimum Wages Don't Have to Reduce Employment: A Literature Review . Working Papers Series: Growth and Employment in Europe: Sustainability and Competiveness, Working Paper No. 19, Vienna University of Economics and Business, p. 12 ff. (PDF)