ol·​i·​gop·​so·​ny | \ ˌä-lə-ˈgäp-sə-nē How to pronounce oligopsony (audio) , ˌō-\

Definition of oligopsony

: a market situation in which each of a few buyers exerts a disproportionate influence on the market

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Other Words from oligopsony

oligopsonistic \ ˌä-​lə-​ˌgäp-​sə-​ˈni-​stik How to pronounce oligopsonistic (audio) , ˌō-​ \ adjective

Did You Know?

You're probably familiar with the word monopoly, but you may not recognize its conceptual and linguistic relative, the much rarer "oligopsony." Both "monopoly" and "oligopsony" are ultimately from Greek, although "monopoly" passed through Latin before being adopted into English. "Monopoly" comes from the Greek prefix "mono-" (which means "one") and "pōlein" ("to sell"). Oligopsony derives from the combining form "olig-" ("few") and the Greek noun "opsōnia" ("the purchase of victuals"), which is ultimately from the combination of "opson ("food") and "ōneisthai" ("to buy"). It makes sense, then, that "oligopsony" refers to a "buyers' market" in which the seller is subjected to the potential demands of a limited pool of buyers. Another related word is "monopsony," used for a more extreme oligopsony in which there is only a single buyer.

First Known Use of oligopsony

1942, in the meaning defined above

History and Etymology for oligopsony

olig- + Greek opsōnia purchase of victuals, from opsōnein to purchase victuals, from opson food + ōneisthai to buy — more at venal

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Last Updated

23 May 2019

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Time Traveler for oligopsony

The first known use of oligopsony was in 1942

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Financial Definition of oligopsony

What It Is

An oligopsony is a market in which only a few buyers purchase all of an industry's output.

How It Works

Let's assume that Company XYZ, Company ABC and Company 123 buy 95% of the country's carrots. If Company XYZ lowers the price it will pay for carrots, producers may choose to sell to Company ABC and Company 123 instead. But if Company ABC and Company 123 instead decide to follow Company XYZ's lead and pay less, the three companies can essentially control almost the entire carrot market through their power to maintain market stability and pay lower prices.

Why It Matters

As you can see, buyers exert tremendous power over sellers in an oligopsony because producers have so few customers. Buyers in an oligopsony are keenly interested in what the other buyers do next -- they are torn between increasing profits and trying to gain competitive advantage. In turn, they can drive down prices.

Source: Investing Answers

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