Oligopsony - is it a term from a textbook on economics or a real market?

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

The meaning of the term "monopoly" is known to everyone: there is only one seller on the market, and antimonopoly legislation and special government agencies are fighting against monopolists. To a person who is not connected with the profession of a marketer or an economist, it may seem that there can only be he althy competition in the market, but this is not so.

Types of markets

There are many other intermediate market conditions besides the well-known monopoly. Depending on the number of buyers and sellers, they are divided into the following subspecies:

• oligopoly and monopoly of several kinds;
• polypoly;
• monopsony;
• oligopsony.

Let's dwell on oligopsony and consider specific examples of such market relations.

In the economy

Oligopsony in the economy is a state of the market when several buyers can buy goods from a large number of sellers. Its characteristic feature is the great trading power of buyers, who can significantly influence the terms of supply, including the price of products.

The antonym of oligopsony is oligopoly, where the situation on the market is completely opposite. Many buyers havedemand for goods of several sellers.

The Russian mobile market can be considered oligopolistic. Almost all categories of the population have a demand for the services of telecom operators, but only four companies in Russia provide them, if we talk about the national coverage of the country. Not including regional companies, Russians can purchase a SIM card from four vendors such as MTS, Beeline, Megafon and Tele2.

Any such market is very sensitive to pricing and marketing strategies. Representatives of oligopsony tend to underestimate prices. Although this process proceeds within reasonable limits.

Examples of oligopsony

Let's describe this complex term in simple words and examples. When there are two enterprises in the city that are looking for an employee for the position of financial director, the resulting situation is an oligopsony.

There are a lot of candidates for a position with a good salary, that is, sellers of their labor force. There are only two buyers who are ready to buy human labor.

Another example of an oligopsony market is the military manufacturing industry. Many countries mass-produce military equipment. However, at the same time, not many countries in the world require such goods according to the standards for the rearmament of the national army. In this case, many sellers are manufacturing plants, and only some governments of the world act as buyers.

An example of oligopsony can also be considered the setagricultural producers and enterprises for the processing of raw materials. In region X, a significant part of the population is engaged in cow breeding, and therefore the inhabitants sell milk to buyers of two local factories. Thus, there are dozens or even hundreds of sellers of goods, and only a few buyers. That is, it is oligopsony.

In professional sports, this concept is found at every turn. For example, the relationship between professional football players and several clubs. That is, in this case, oligopsony is a large number of successful players with a limited number of places where they can prove themselves.

The situation in Russia

An example of oligopsony in Russia is the manufacturers of launch vehicles for the space industry. Such products are produced by only three enterprises in the Russian Federation, however, component parts, mechanisms, body and engine parts are produced by many suppliers.

The same can be said about the global space industry as a whole. The need for manned vehicles, cargo ships and other spacecraft exists in a limited number of countries. The set of buyers here are the USA, China, Russia, as well as those states that plan to launch ships into space. At the same time, a large number of companies around the world are engaged in the production of equipment.

Also, an example of oligopsony is the market of chain grocery stores. About 10 retailers operate in Russia (Pyaterochka, Dixy, Perekrestok, Okay,Victoria, Auchan, Metro) and a huge number of product distributors.

In this case, oligopsony is a few retailers with their chain grocery stores acting as buyers, and sellers are many suppliers.

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AfrikaansAlbanianArabicArmenianAzerbaijaniBasqueBelarusianBengaliBosnianBulgarianCatalanCebuanoChichewaChinese (Simplified)Chinese (Traditional)CroatianCzechDanishDutchEnglishEsperantoEstonianFilipinoFinnishFrenchGalicianGeorgianGermanGreekGujaratiHaitian CreoleHausaHebrewHindiHmongHungarianIcelandicIgboIndonesianIrishItalianJapaneseJavaneseKannadaKazakhKhmerKoreanLaoLatinLatvianLithuanianMacedonianMalagasyMalayMalayalamM alteseMaoriMarathiMongolianMyanmar(Burmese)NepaliNorwegianPersianPolishPortuguesePunjabiRomanianRussianSerbianSesothoSinhalaSlovakSlovenianSomaliSpanishSundaneseSwahiliSwedishTajikTamilTeluguThaiTurkishUkrainianUrduUzbekVietnameseWelshYiddishYorubaZulu

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