What are the Negative Impacts of a Monopsony Market on Sellers?

[Suba]

Monopsony is a market form rarely discussed by economists. Therefore, in this thread, we will discuss a monopsony market, where there are many sellers but only one buyer, resulting in an imbalance between supply and demand, or the sellers' dependence on a single buyer.

In a monopsony market, the factors of production, such as labor, raw materials, and other agricultural products, are typically traded. Some concrete examples include sugarcane farmers selling their harvests to sugar mills, fishermen selling their fish to large collectors, palm oil farmers selling their harvests to palm oil mills, multinational companies buying raw rubber from farmers, and so on.

 

[Augusta]

monopsony exploits its market power excessively, it can harm suppliers, potentially leading to reduced supply, lower product quality, or the exit of smaller suppliers from the market

 

[kit_hung]

Monopsony is a market situation where there are many sellers but only one buyer, which gives buyers significant power to control prices and terms of trade. In this situation, sellers such as farmers or fishermen are forced to rely on that single buyer, and often receive low prices for their products because they have no other choice. Examples include sugarcane farmers who sell only to sugar mills or fishermen who sell their fish to large collectors. This system can affect the sellers' income and create high dependency, although it also simplifies distribution for the buyer because he is assured of obtaining the product in large quantities.