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Oligopsony, characterized by a market dominated by a few buyers, can lead to increased efficiency in purchasing as these buyers often have significant negotiating power, allowing them to secure lower prices from suppliers. This can benefit consumers through reduced costs, as lower input prices can translate into lower retail prices. Additionally, oligopsony can foster innovation among suppliers, who may seek to differentiate their products to attract the limited number of buyers. However, it's essential to balance these advantages with considerations of potential market power abuse and reduced supplier margins.

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What are the examples of oligopsony?

Examples of oligopsony include the market for professional athletes, where a few teams dominate the recruitment and salary setting processes, and the market for agricultural products, where a few large buyers control the prices farmers receive for their crops. Additionally, the market for healthcare services, where a small number of insurance companies negotiate prices with healthcare providers, can also exhibit oligopsonistic characteristics.


Firms under the conditions of oligopsony?

The members of the major league sports are in an oligopsony. There are many young men (particularly men) who would like to play professional basketball, football and baseball, but there are only a few major league teams on which they can play. Although the major league baseball teams have "farm" clubs, these too are limited in number. Oligopsony, like oligopoly is also a matter of definition. If I live in New Nowhere, Kansas then there are no teams for which I can play without serious dislocation. On the other hand, if I live on the east coast, between Washington, DC and Boston then I am facing an oligopsonistic market. In agriculture, farmers faced with oligopolistic buyers sometimes get together to form collective selling organizations (co-ops) to limit competition among themselves.


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