Buyer Power

The bulk of this chapter looked at facets of market power that is possessed and exploited by sellers. However, in markets with a few buyers that individually make a sizeable fraction of total market purchases, buyers can exercise power that will influence the market price and quantity.

The most extreme form of buyer power is when there is a single buyer, called a monopsony. If there is no market power among the sellers, the buyer is in a position to push the price down to the minimum amount needed to induce a seller to produce the last unit. The supply curve for seller designates this price for any given level of quantity. Although the monopsonist could justify purchasing additional units up to the point where the supply curve crosses ...

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