Tuesday, December 21, 2004
Word of the Day
monopsony: (1) A situation in which demand comes from only one customer, a demand-side monopoly. (2) Wal-Mart.
synonym: buyer's monopoly
A common theoretical implication is that the price of the good is pushed down near the cost of production. The price is not predicted to go to zero because if it went below where the suppliers are willing to produce, they won't produce.
A not-so-theoretical implication is that production will be pushed overseas. For an interesting discussion of the effects of Wal-Mart's monopsony, read Charles Fishman's "The Wal-Mart You Don't Know."