Monopsony pricing

Monopsony is the analogue of a monopoly, this time with market concentration on the demand side.

In a market with is a single buyer, the competitive pressure that drives price up to the efficient level is absent. The monopsonist will be able to set a price that maximizes total consumer surplus. [See also: Labor market monopsony]

You can try varying price in the first graph (on the left) to see how consumer surplus varies. On the right side, you can see the optimal monopsony pricing level.

Monopsonies are most prevalent in input markets, such as raw agricultural products or the labor market.