What does oligopsony mean?
Oligopsony is a market condition in which a small number of buyers purchase goods from many sellers. Because the buyers represent a large share of demand, they can often negotiate lower prices, demand better terms, or exert considerable pressure on suppliers. The word is the buying-side equivalent of oligopoly, which describes a small number of sellers in a market with many buyers. It is especially discussed in agricultural, commodity, labour, and retail economics, where large organizations may be the principal purchasers from numerous smaller producers. Although the term is uncommon outside technical writing, it names a familiar economic imbalance: when demand is concentrated, buyers gain bargaining power, and competition among suppliers may be weakened. A market with only one buyer is more precisely described as a monopsony.
nounA market condition in which a relatively small number of buyers purchase goods from many sellers, giving the buyers considerable bargaining power. It is the buying-side counterpart of oligopoly.
- A market structure or condition in which a small number of buyers purchase from many sellers, often giving buyers substantial bargaining power.
"The merger created a situation of oligopsony, allowing the combined retailer to negotiate lower prices with its suppliers."
"Agricultural markets can exhibit oligopsony when a few large processors are the main purchasers from many individual farmers."
"The report concluded that the proposed supermarket would increase buyer concentration and create oligopsony in the local milk market."
The plural is used when referring to multiple oligopsonistic markets or situations.
"The study compares oligopsonies in several agricultural industries."
When a few buyers control the demand for many suppliers, the market becomes an oligopsony—a rare name for a familiar imbalance of power.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Where does oligopsony come from?
Oligopsony comes from Greek roots meaning “few” and “buyers” or “purchasing.” Its formation follows the pattern of oligopoly, but it describes concentration on the buying side of a market rather than the selling side. The related term monopsony uses the same buying root with a prefix meaning “one,” while monopoly applies the “one” pattern to sellers. The word entered modern economic usage in the late nineteenth and early twentieth centuries as analysts developed precise terms for different forms of market concentration.
How oligopsony is actually used
This is a specialized economics term, used mainly in discussions of markets, competition, and bargaining power. It is related to, but distinct from, monopoly and monopsony: the central idea is a limited number of powerful buyers rather than absolute control by one participant.
Easily confused with oligopsony
Monopsony describes a market with only one buyer, whereas oligopsony describes a market with a small number of buyers.
Oligopsony concerns the concentration of buyers, while oligopoly concerns the concentration of sellers.