An oligopsony (from

Greek Greek may refer to: Greece Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group. *Greek language, a branch of the Indo-European language family. **Proto-Greek language, the assumed last common ancestor ...

ὀλίγοι (''oligoi'') "few" and ὀψωνία (''opsōnia'') "purchase") is a

market form Market structure, in economics, depicts how firms are differentiated and categorised based on the types of goods they sell (homogeneous/heterogeneous) and how their operations are affected by external factors and elements. Market structure makes it ...

in which the number of buyers is small while the number of sellers in theory could be large. This typically happens in a market for inputs where numerous suppliers are competing to sell their product to a small number of (often large and powerful) buyers. It contrasts with an

oligopoly An oligopoly (from Greek ὀλίγος, ''oligos'' "few" and πωλεῖν, ''polein'' "to sell") is a market structure in which a market or industry is dominated by a small number of large sellers or producers. Oligopolies often result from ...

, where there are many buyers but few sellers. An oligopsony is a form of

imperfect competition In economics, imperfect competition refers to a situation where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market. Imperfect competition will cause market inefficiency when it hap ...

. The terms

monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...

(one seller),

monopsony In economics, a monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. The microeconomic theory of monopsony assumes a single entity ...

(one buyer), and

bilateral monopoly A bilateral monopoly is a market structure consisting of both a monopoly (a single seller) and a monopsony (a single buyer). Overview In a standard monopoly structure, the monopolist sells to multiple buyers with no market power, thereby giving t ...

have a similar relationship.

Industry examples

In each of these cases, the buyers have a major advantage over the sellers. They can play off one supplier against another, thus lowering their costs. They can also dictate exact specifications to suppliers, for delivery schedules, quality, and (in the case of agricultural products) crop varieties. They also pass off much of the risks of overproduction, natural losses, and variations in cyclical demand to the suppliers.

Agriculture

One example of an oligopsony in the world economy is

cocoa Cocoa may refer to: Chocolate * Chocolate * ''Theobroma cacao'', the cocoa tree * Cocoa bean, seed of ''Theobroma cacao'' * Chocolate liquor, or cocoa liquor, pure, liquid chocolate extracted from the cocoa bean, including both cocoa butter and ...

, where three firms (

Cargill Cargill, Incorporated, is a privately held American global food corporation based in Minnetonka, Minnesota, and incorporated in Wilmington, Delaware. Founded in 1865, it is the largest privately held corporation in the United States in ter ...

, Archer Daniels Midland, and

Barry Callebaut Barry Callebaut is a Belgian-Swiss cocoa processor and chocolate manufacturer, with an average annual production of 2.3 million tonnes of cocoa & chocolate (fiscal year 2021/2022). It was created in 1996 through the merging of the Belgian ...

) buy the vast majority of world cocoa bean production, mostly from small farmers in third-world countries. Likewise, American

tobacco Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...

growers face an oligopsony of

cigarette A cigarette is a narrow cylinder containing a combustible material, typically tobacco, that is rolled into thin paper for smoking. The cigarette is ignited at one end, causing it to smolder; the resulting smoke is orally inhaled via the opp ...

makers, where three companies (

Altria Altria Group, Inc. (previously known as Philip Morris Companies, Inc.) is an American corporation and one of the world's largest producers and marketers of tobacco, cigarettes and related products. It operates worldwide and is headquartered in ...

Brown & Williamson Brown & Williamson Tobacco Corporation was a U.S. tobacco company and a subsidiary of multinational British American Tobacco that produced several popular cigarette brands. It became infamous as the focus of investigations for chemically enhanc ...

, and

Lorillard Tobacco Company Lorillard Tobacco Company was an American tobacco company that marketed cigarettes under the brand names Newport, Maverick, Old Gold, Kent, True, Satin, and Max. The company had two operating segments: cigarettes and electronic cigarettes. Th ...

) buy almost 90% of all tobacco grown in the US and other countries.

Publishing

In U.S. publishing, five publishers known as the Big Five account for about two thirds of books published. Each of the companies runs a series of specialized imprints, which cater to different market segments and often carry the name of formerly independent publishers. Imprints create the illusion that there are many publishers, but imprints within each publisher co-ordinate to avoid competing with one another when they seek to acquire new books from authors. Thus, authors have fewer truly-independent outlets for their work. That depresses advances paid to authors and creates pressure for authors to cater to the tastes of the publishers in order to ensure publication, reducing viewpoint diversity.

Retail

Over at least 30 years, supermarkets in developed economies around the world have acquired an increasing share of grocery markets. In doing so, they have increased their influence over suppliers—what food is grown and how it is processed and packaged—with impacts reaching deep into the lives and livelihoods of farmers and workers worldwide. In addition to increasing their market share with consumers, consolidation of suppliers means that retailers can exercise significant market power. In some countries, this has led to allegations of abuse, unethical and illegal conduct. The situation in Australia is a good example since two retailers, Coles and Woolworths control 70% of the national food market.

References

Sources

* Bhaskar, V., A. Manning and T. To (2002) 'Oligopsony and Monopsonistic Competition in Labor Markets,' ''Journal of Economic Perspectives,'' 16, 155–174. * Bhaskar, V. and T. To (2003) 'Oligopsony and the Distribution of Wages,' ''European Economic Review,'' 47, 371–399. {{microeconomics Market structure Imperfect competition Oligopoly he:אוליגופול#אוליגופסון ואוליגופול דו צדדי