oligopsony

noun

Save Word

ol·i·gop·so·ny | \ ˌä-lə-ˈgäp-sə-nē

, ˌō- \

Definition of oligopsony

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

Other Words from oligopsony Did You Know? Learn More about oligopsony

Keep scrolling for more

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.

Keep scrolling for more

Learn More about oligopsony

Listen to Our Podcast about oligopsony

Dictionary Entries near oligopsony

Statistics for oligopsony

Cite this Entry

“Oligopsony.” The Merriam-Webster.com Dictionary, Merriam-Webster Inc., https://www.merriam-webster.com/dictionary/oligopsony. Accessed 23 January 2020.

Keep scrolling for more

More Definitions for oligopsony

oligopsony

noun

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