MONOPSONY AND DUOPSONY Monopoly is sometimes so defined as to include concentration of control over production and price on either side of the market. A monopoly-like situation, properly called monopsony, exists on the buyers' side of the market when a single buyer, or a number of buyers acting in unison, control the entire demand for a commodity, or enough of it to enable them to augment their profits by restricting the amount that they will purchase or by reducing the price that they will pay.
Duopsony, a situation comparable to duopoly, exists on the buyers' side of the market when two buyers control the entire demand for a commodity, or enough of it to enable them to augment their profits by limiting their purchases and depressing the price. Duopsony is almost as unlikely as monopsony to offer sellers any real alternative in sources of demand.
The situations discussed in the following pages relate almost exclusively to the presence or absence of competition among sellers. The buyers' side of the ultimate market for consumers' goods is almost always effectively competitive. Ultimate consumers number in the millions; they have seldom been able to attain a degree of organization sufficient to enable them materially to affect the volume of their purchases or the price at which they buy. Monopsony, duopsony, and oligopsony make their appearance almost exclusively in the markets in which the producers and distributors of goods and services purchase their supplies. Even here they appear to be of less frequent occurrence than are the equivalent conditions on the sellers' side of the market. The discussion of noncompetitive situations which follows, therefore, deals principally with monopolistic control over supply. Only incidental consideration is given to monopoly-like control over demand.
The Use Of Terms At the one extreme of possible market situations stands perfect competition, a condition which is nonexistent. At the other stands absolute monopoly power, a condition which is likewise nonexistent. If the use of the term competition is confined to those situations which fulfill the requirements of perfection and if all those which fall short of this ideal are regarded as monopolistic, then all markets are monopolistic. If, on the other hand, the use of the term monopoly is confined to situations in which monopoly power is absolute and if all others are regarded as competitive, then all markets are competitive. If both terms are defined in their strictest possible sense, then no actual market can be described as either competitive or monopolistic. In none of these cases would it be possible to use the terms competition or monopoly to distinguish among actual market situations, which range all the way from those that approach perfect competition on the one hand to those that approach absolute monopoly power on the other. If they are to be practically useful, the terms must be employed in a looser sense. It is possible to describe as competitive those situations in which the conditions requisite to effective or workable competition appear to obtain and as monopolistic those in which there appears to exist an appreciable degree of monopoly power. It is in this looser sense that the terms are here to be employed.