An oligopsony is exactly opposite to oligopoly where few buyer exists for a particular product produced by the producer.

In an oligopoly market situation few suppliers dominate the market, whereas in an oligopsony few buyers dominate the market for particular product or services.

Good examples are the many media sub-sectors where a few companies (the major media conglomerates) publish records, films and books, but there are many musicians, actors, writers etc., selling to these few companies.

Agriculture based business is also a oligopsony wherein there will be more number of farmers producing agriculture based goods but these are purchased by the middle men for taking them to market for marketing. Indeed these middle men are few but they decide the price to pay and sell these goods but not the real producers who are farmers

Characteristics of oligopsony market

An oligopsony market is a form of imperfect competition. As few buyers exists in this market situation, they could dictate the sellers in the market in fixation of price for goods and services. In some situations buyer may force the seller to accept the terms and conditions for exchange of goods and services, which would also effect the seller in deciding the fair prices for the goods and services produced. This situation may sometimes lead to sell the goods below the cost thereby the seller may face losses and may exit the market sometimes. Having influence over the market by the buyer and because of their size and financial resources, oligopsony firms are often able to influence government policies in ways that produce even more favorable market outcomes for them.

Market Manipulation in oligopsony

Marketing and production contracts arc two important tools that oligopsony firms use to manipulate agricultural markets and accumulate capital. Marketing contracts are contracts in which famers agree to supply an agribusiness firm with an agricultural commodity at a future date. Production contracts require farmers to provide agricultural or farming services for an agribusiness firm:

oligopoly market.ppt