Monopsony

A market with a single buyer (or dominant buyer) who has outsized power to dictate terms to sellers. The mirror image of monopoly: where a monopolist controls supply and raises prices, a monopsonist controls demand and suppresses prices. Walmart's relationship with small suppliers, Amazon's relationship with third-party sellers, and large employers in small towns are all monopsony dynamics. The result: suppliers are forced to accept unfavorable terms because there's no alternative buyer.

When to use it

When evaluating whether a customer, platform, or buyer has disproportionate power over your business; when assessing market structure and value chain dynamics; when a supplier consistently faces margin pressure from a dominant buyer; when building strategy in markets with concentrated buying power.

How it can help

If you're selling to one dominant customer who represents more than 30-40% of your revenue, you're in a monopsony trap. The buyer's negotiating power increases with your dependency. The strategic response: diversify your customer base before the dominant buyer realizes their leverage, or become so essential to the buyer that the relationship shifts from extractive to mutual. For investors and strategists: identify monopsony dynamics in markets you're entering—they determine who captures value in the chain.