Classroom Companion: Business

Definition 13.5 Monopsony
A monopsony is a market with many sellers and only one buyer.
In the digital economy, the sellers in the monopsony are content providers, often 
independent artists, who see the monopsony provider as the only channel through 
which they can distribute their art. A monopsony with both buying and selling 
sides controls the whole market monopolistically, buying content cheaply and 
reselling it with considerable profit.
Example of a (de facto) monopsony in a multisided market is the video sharing 
service of YouTube. The three most important customer groups are producers of 
video clips, viewers, and advertisers. As monopsony, YouTube is a channel for pro-
 
Chapter 13 · Digital Monopolies and Oligopolies

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ducers to distribute video clips to the viewers. Production and distribution of the 
video content is free of charge. As a monopoly, the video clips are provided to the 
viewers, also free of charge. Revenues are generated by the advertisers. The adver-
tising market may either be regarded as an oligopoly if only the advertisement 
channels provided by the dominating stakeholders in the digital economy are 
counted or as a market with monopolistic competition if both large, small, and 
non-digital advertisement channels are counted.
Definition 13.6 Oligopsony
The oligopsony is similar to the monopsony. The only difference is that there are 
more than one (but just a few) buyers in the oligopsony market, while there is only 
one in the monopsony market.
The current music streaming market is an oligopsony with three major resellers: 
Spotify, Apple Music, and SoundCloud. The customers in this market are single 
artists and producers. Publishers of e-books are also an oligopsony with a few 
publishers dominating the market. The strategy of the oligopsony with both a buy-
ing and a selling side is more complicated than that of the oligopoly since it com-
petes in two interacting markets at the same time: competing as buyer of content 
and competing as resellers of the same content.
.
Table 
13.1
and 
.
Fig. 
13.1
summarize the various market models defined 
above. The table characterizes the markets in terms of the number of sellers, the 
number of buyers, and the barriers of entry.
. Table 13.1 Market types. (Authors’ compilation)