Monopsonies - Examples

Examples

A single-payer universal health care system, in which the government is the only "buyer" of health care services, is an example of a monopsony.

During the Cold War, the defense industry in the United States had a monopsonistic element in respect to major defense projects; strategic considerations limited the sole buyer (the United States Department of Defense) to procuring its needs from domestic suppliers, while there were virtually no other parties other than DoD with the interest or resources to purchase many of the suppliers' products. In the post-Cold War world, this has weakened, as more states have the need and ability to purchase sophisticated military equipment, and DoD is freer to purchase from foreign (particularly European) suppliers. An interesting example of a situation where both a monopoly and a monopsony exist (a bilateral monopoly) involves the market for nuclear-powered aircraft carriers: the monopsony being with only one purchaser (the United States Navy) and the monopoly being with only one producer (Huntington Ingalls Industries, as their Newport News Shipbuilding division is the only place with the capacity to manufacture, overhaul, and decommission them).

It has also been argued that Wal-Mart, in the United States, functions as a monopsony in certain market segments, as its buying power for a given item may dwarf the remaining market. Another possible monopsony could develop in the exchange between the food industry and farmers.

Texas is said to have almost total control over the K-12 textbooks in the US due to its market dominance. Unlike most other states, Texas operates as a single unified school district, with all students being taught the same curriculum from the same books statewide. Combined with Texas' large size, Texas' textbook purchases far outweigh those of other buyers.