Oligopsony
Candlefocus EditorHaving a few large buyers in any market inevitably leads to fewer suppliers being able to survive. Furthermore, because they are dealing with a smaller group of buyers, suppliers have to accept the prices set by the oligopsonists. This means that the suppliers no longer have the ability to adjust their pricing levels in order to compete and cover their costs, which may lead to them being forced out of the market.
The supermarkets industry is a prime example of an oligopsony. As supermarkets have grown in size and scope, the number of suppliers who are able to provide goods to multiple outlets has become much smaller. This has left supermarkets with a great deal of market power, allowing them to drive prices down to benefit their own profits. This cutting of prices has had a significant impact on the suppliers, who are often in a weaker position to negotiate deals and cannot afford to accept low prices for their goods.
Oligopsony also has a global reach in some markets as large buyers are in many different countries. This means that suppliers who are trying to export their goods to different markets often have to deal with different pricing structures, which increases the cost of the goods and makes it harder for them to compete.
Overall, oligopsony has a significant effect on the market, allowing the big buyers to wield considerable influence over the industry. As these trends in the market continue and the number of suppliers continues to shrink, it is likely that the power of the oligopsonists will only increase. This will have a direct impact on suppliers who will struggle to make a profit and also have an indirect effect on the economy as a whole, due to the lack of competition in the market.