Monopoly vs. Monopsony — What's the Difference?
By Tayyaba Rehman — Updated on September 28, 2023
A "monopoly" exists when a single entity is the only seller in a market, while a "monopsony" is when a single buyer dominates a market. Both can influence prices, but from opposite ends.
Difference Between Monopoly and Monopsony
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Key Differences
Monopoly" and "Monopsony" are economic terms that describe situations where market power is concentrated. While they might sound similar, their implications are fundamentally different.
A "monopoly" is a situation where a single producer or provider controls the entire supply of a particular product or service. This dominance allows the monopolist to set prices and control supply, often leading to higher prices for consumers.
Contrarily, a "monopsony" exists when there is only one buyer in a particular market, usually for a type of labor or product. This single buyer can dictate the price they are willing to pay, often pushing prices down since sellers have limited outlets for their goods or services.
While both monopolies and monopsonies result in distorted market outcomes and can harm economic efficiency, they do so from opposite directions: monopolies by limiting competition among sellers and potentially raising prices, and monopsonies by limiting competition among buyers, potentially depressing prices.
It's crucial to understand these terms in the context of market dynamics, as both situations can lead to inefficiencies, reduced innovation, and can warrant regulatory scrutiny or intervention.
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Comparison Chart
Definition
Single seller dominates a market.
Single buyer dominates a market.
Price Influence
Can raise prices due to no competition
Can depress prices with purchasing power
Typical Concerns
Higher prices, less innovation
Lower prices to producers, potential scarcity
Market Side
Supply side of the market
Demand side of the market
Regulatory Response
Break up or regulate monopolies
Ensure multiple buyers or set price floors
Compare with Definitions
Monopoly
Exclusive control of a product or service in a market.
The company held a monopoly in the smartphone industry.
Monopsony
Disproportionate buying power held by one entity.
The giant retailer's monopsony pushed down supplier prices.
Monopoly
A board game where players trade properties.
We played Monopoly until midnight.
Monopsony
Single purchaser greatly influencing market prices.
With its buying power, the organization became a monopsony.
Monopoly
Singular power to trade in a particular commodity.
She had a monopoly on the town's fresh produce.
Monopsony
Singular demand source in a market scenario.
In some rural areas, a single hospital might act as a monopsony.
Monopoly
Exclusive possession or control.
The big tech firms are often accused of seeking a monopoly.
Monopsony
Dominant buyer limiting potential selling outlets.
Farmers faced a monopsony, having only one major buyer for their crops.
Monopoly
A monopoly (from Greek μόνος, mónos, 'single, alone' and πωλεῖν, pōleîn, 'to sell') exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly and duopoly which consists of a few sellers dominating a market.
Monopsony
Market situation with only one buyer.
The small town's single factory was the monopsony for labor.
Monopoly
Exclusive control by one group of the means of producing or selling a commodity or service
"Monopoly frequently ... arises from government support or from collusive agreements among individuals" (Milton Friedman).
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 to have market power over all sellers as the only purchaser of a good or service.
Monopoly
A company, group, or individual having exclusive control over a commercial activity.
Monopsony
A market situation in which the product or service of several sellers is sought by only one buyer.
Monopoly
A commodity or service so controlled.
Monopsony
(economics) A market situation in which there is only one buyer for a product.
Monopoly
Exclusive possession or control
Arrogantly claims to have a monopoly on the truth.
Monopsony
(economics) A buyer with disproportionate power.
Monopoly
Something that is exclusively possessed or controlled
Showed that scientific achievement is not a male monopoly.
Monopsony
(economics) a market in which goods or services are offered by several sellers but there is only one buyer
Monopoly
A situation, by legal privilege or other agreement, in which solely one party (company, cartel etc.) exclusively provides a particular product or service, dominating that market and generally exerting powerful control over it.
Monopoly
An exclusive control over the trade or production of a commodity or service through exclusive possession.
A land monopoly renders its holder(s) nearly almighty in an agricultural society.
Monopoly
The privilege granting the exclusive right to exert such control.
Granting monopolies in concession constitutes a market-conform alternative to taxation for the state, while the crown sometimes bestowed a monopoly as an outrageous gift.
Monopoly
(metonymy) The market thus controlled.
Monopoly
(metonymy) The holder (person, company or other) of such market domination in one of the above manners.
Monopoly
The exclusive power, or privilege of selling a commodity; the exclusive power, right, or privilege of dealing in some article, or of trading in some market; sole command of the traffic in anything, however obtained; as, the proprietor of a patented article is given a monopoly of its sale for a limited time; chartered trading companies have sometimes had a monopoly of trade with remote regions; a combination of traders may get a monopoly of a particular product.
Raleigh held a monopoly of cards, Essex a monopoly of sweet wines.
Monopoly
Exclusive possession; as, a monopoly of land.
If I had a monopoly out, they would have part on 't.
Monopoly
The commodity or other material thing to which the monopoly relates; as, tobacco is a monopoly in France.
Monopoly
(economics) a market in which there are many buyers but only one seller;
A monopoly on silver
When you have a monopoly you can ask any price you like
Monopoly
Exclusive control or possession of something;
They have no monopoly on intelligence
Monopoly
A board game in which players try to gain a monopoly on real estate as pieces advance around the board according to the throw of a die
Monopoly
Absence of competition leading to total market dominance.
Due to the monopoly, there were no alternative internet providers.
Common Curiosities
What impact can a monopsony have on prices?
A monopsony can depress prices since they have significant purchasing power.
What's the primary difference between a monopoly and monopsony?
A monopoly is a single seller in a market, while a monopsony is a single buyer.
Can a company be both a monopoly and monopsony?
Yes, if it's the only seller of a product and the primary buyer of a resource.
Do monopsonies exist in real-world labor markets?
Yes, especially in areas where one employer dominates, like a mining town.
Are monopolies always illegal?
Not always. Legality depends on how the monopoly is achieved and its impact.
Can a monopoly lead to higher prices?
Yes, monopolies can raise prices due to a lack of competition.
Are both monopolies and monopsonies bad for the economy?
Both can lead to market inefficiencies and may warrant regulatory attention.
Can a monopsony lead to a shortage?
Yes, if prices are driven too low, suppliers might reduce or cease production.
Is "Monopoly" also a game?
Yes, Monopoly is a popular board game centered on property trading.
How can governments respond to monopolies?
They might break them up, regulate them, or introduce competition.
How can competition be introduced in a monopsony market?
By encouraging multiple buyers or setting regulations.
Can monopolies stifle innovation?
Often, as less competition can reduce the drive to innovate.
Why might sellers dislike monopsonies?
Monopsonies can push down prices, disadvantaging sellers.
Are patents a form of monopoly?
Temporarily, yes. They grant exclusive rights to innovations for a period.
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Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
