Monopsony Market: Definition, Characteristics, Formed Factors, Strengths and Weaknesses
Monopsony Market: Definition, Characteristics, Formed Factors, Advantages and Disadvantages – Is that a monopsony market?, On this occasion About the knowledge.co.id will discuss it and of course about other things that also cover it. Let's look at the discussion together in the article below to better understand it.
Monopsony Market: Definition, Characteristics, Formed Factors, Strengths and Weaknesses
Monopsony market is a form of market where there is only one customer and usually a corporate actor acts as the sole buyer and controls the market content.
A monopsony market is a situation in which one business actor controls the receipt of supplies or becomes the sole buyer of goods and/or services in a commodity market.
The definition of a monopsony market is a form of market in which there is one consumer (usually a business actor) who becomes the sole buyer and controls the commodity market.
Monopsony markets are included in imperfect competition markets, namely markets that have not been well organized. Monopsony market conditions often occur in plantation areas and the beef (chicken) industry, so that the bargaining position in prices for farmers is nonsense.
In other words, there is a group of entrepreneurs (buyers) in this market who control the market, which can actually create the potential for unfair competition.
The monopson market has its own uniqueness, namely that it has only one buyer and several sellers in that market. So traders are very dependent on only one buyer.
For several reasons, including inadequate market conditions, where there are no buyers enthusiasts, locations that are very difficult to reach, high operating costs and much more Again.
Factors Forming Monopsony Market
In general, monopsony markets are formed in industrial areas of beef cattle and plantations where farmers are not in a good position to bargain. While the factors that make a monopsony market are formed are as follows:
- There are no enthusiastic buyers in the market.
- Producer locations are in remote and difficult to reach places.
- High operational costs.
As for the implementation, examples of monopsony markets are vegetable markets, as well as existing dairy cattle in a remote area and difficult in terms of distribution to other places to sell the product to consumer. And there are difficulties in terms of product distribution, forcing farmers and breeders to sell their products to one buyer in bulk at a low price.
Characteristics of a Monopsony Market
As explained above, the Monopsony Market has its own uniqueness compared to other types of markets, which include:
- There is only one consumer with several traders.
- The price of the products sold is determined by the consumers.
- Have income or income that is not evenly distributed.
- Disputes often arise between traders and consumers.
- The products sold are raw materials, such as vegetables and other products.
Advantages and Disadvantages of a Monopsony Market
There are several advantages and disadvantages of the Monopsony Market that you need to know about, which include the following:
Monopsony Market advantage
Below are some of the advantages provided by the Monopsony Market, which include:
- The quality of the goods traded is guaranteed
The consumer has complete power in a monopsony market. This means that traders must meet the needs of their consumers both in terms of price and quality of their products.
If the quality of the product sold is lower, then the buyer does not want to take the product. Therefore, this causes heavy losses for the traders as they are unable to find other buyers.
Consumers will only take the production of high-quality goods. Therefore, traders must always maintain and improve the quality of the products they offer.
- Creativity and New Innovation Always Increase
One of the ways in which traders make huge profits is through minimal production costs, but they are able to produce high quality products.
This will motivate traders to continue to innovate in the field of business and also the products they produce.
For example, look for substitute raw materials of the same quality but at a lower price, make production aids more effective and so on.
- Easy to Determine Prices in a Monopsony Market
In a monopsony market, it is the buyer who determines the price of the product offered by the seller. Therefore, it is very easy if you want to price in a monopsony market.
The price determined is not affected by inflation or deflation. In addition, consumers will set the same price for all sellers in a monopsony market.
- Smoother Sales Path
There is only one buyer in this market who accepts all products traded through a "wholesale" or wholesale system.
Therefore, sales channels for trade will not decrease and the production process will always run smoothly because the results are sold directly to the buyers.
Disadvantages of Monopsony Markets
There are other weaknesses behind the advantages provided by the monopsony market, which include the following:
- Consumers Often Behave Unfairly Against Traders
Buyers very often set prices without first considering the conditions experienced by traders or their economic conditions.
Because they only prioritize profits in themselves. For example, buyers will not want to increase prices even though there is inflation, even though the production process is very expensive.
- Not infrequently Buyers Don't Care About Sellers
The full power held by consumers is often abused by them. With this authorization, buyers do not have to listen to complaints experienced by traders in terms of price, time and also the production process.
Of course this will cause losses for sellers, because buyers are too selfish when they spend their personal gains.
- The Economic Problems That Occur Only Become the Responsibility of the Sellers Only
In this case, buyers rarely experience economic problems, because they have the ability to make decisions that benefit themselves.
Or in other words, commercial operators in this market must overcome various obstacles economic events such as inflation, deflation, shortage of raw materials, production difficulties, and others etc.
Prohibition of Monopsony Market Activities
In fact, the prohibition of activities carried out in market monopsony has been stated in Article 18 of Law no. 5 of 1999, which states that:
A business actor is prohibited from controlling offers or being the only buyer of goods/services traded in that market, which may lead to monopolistic practices or non-competition Healthy.
Pursuant to paragraph (1) if an economic operator or a group of economic operators owns more than 50% of the shares of certain types of controlled goods or services. Thus, the economic operator must suspect or be suspected of having control over delivery receipts or being the only buyer in the market.
Thus the review from About the knowledge.co.id about Monopsony Market , hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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