Legal Definitions - monopsony

Definition: Monopsony is a market situation where there is only one buyer who controls the market.

Example: A small town has only one grocery store. The grocery store is the only buyer of food products in the town. This means that the grocery store has a monopsony over the food market in the town.

Monopsony is the opposite of monopoly. In a monopoly, there is only one seller who controls the market. In a monopsony, there is only one buyer who controls the market. Monopsony can lead to inefficient allocation of resources because the buyer has the power to limit the quantity of the input product or service below the efficient level.