Duopsony

In

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Duopsony is characterized by a small number of buyers and a large number of sellers, which results in buyers having significant market power over sellers. With only two buyers, suppliers have limited options to sell their goods or services, which allows the buyers to exert greater influence over price and other terms of trade.^[2]

In a duopsony, buyers may also engage in strategic behavior, such as colluding to reduce the price they pay for goods or services or engaging in exclusive dealing arrangements with suppliers. These actions can further limit the bargaining power of suppliers and result in reduced competition in the market.^[3]

Examples

Examples of duopsony include the market for agricultural products, where a small number of large buyers purchase crops from numerous small-scale farmers, and the market for labor, where a small number of employers purchase labor from a large pool of workers.^[4]

In the agricultural market, large retailers such as

Duopsony can have significant implications for market outcomes, including reduced competition, lower supplier prices, and reduced supply of goods or services. As buyers have greater market power, they can negotiate lower prices with suppliers, resulting in reduced profits for suppliers and reduced investment in production.[6]

Moreover, duopsony can also result in reduced innovation and product quality, as suppliers may need more incentives to invest in research and development or improve product quality if they cannot negotiate higher prices from buyers.

See also

• Duopoly
• Monopsony
• Monopoly

References