Monopsony Law and Legal Definition

Monopsony is a market situation in which a single buyer controls the market. One buyer dominates, forcing sellers to agree to the buyer's terms. For example, if there is only one cigarette company in a particular area, then a tobacco grower may have no choice but to sell his tobacco to that one cigarette company. The cigarette company therefore virtually controls the price at which it buys tobacco. The opposite of a monopsony is Monopoly

In economics, it refers to a market form in which one buyer faces many sellers. In this situation there will be only one customer for a company’s products. This is also called buyer’s monopoly. Monopsony is an example for imperfect competition. Monopsonist dictates terms to the suppliers as there is only one buyer. An example of a monopsony is single-payer health care system. The government is the only buyer of health care services.