What is monopsony in simple terms?

Few employers mean workers cannot easily move, so firms can pay less.

How does it relate to minimum wages?

Under monopsony, a minimum wage may not reduce jobs and can even raise them.

Monopsony

📈 Economics By CampusDown Wiki Editorial Team Last updated October 27, 2026

Monopsony is a market with one or few buyers who can set the price. In labour markets it means employers can pay workers less than their productivity. Joan Robinson named it in 1933.

Contents

1. Basic idea
2. Dynamic monopsony
3. Minimum wages and evidence
4. FAQ
5. References

Basic idea

Robinson (1933) named the single-buyer counterpart to monopoly. If an employer must raise wages to hire more, a profit-maximising firm hires fewer workers at lower pay than under competition.

Dynamic monopsony

Manning (2003) argued search costs and frictions give firms wage-setting power even with many employers, linked to search and matching theory. Card and colleagues (2018) tied firm wage premiums to inequality.

Minimum wages and evidence

Under monopsony a minimum wage can raise both pay and employment. Card and Krueger (1994) sparked the debate; Staiger and colleagues (2010) and Azar and colleagues (2022) found evidence, reviewed by Manning (2021).

FAQ

What is monopsony in simple terms?: Few employers mean workers cannot easily move, so firms can pay less.
How does it relate to minimum wages?: Under monopsony, a minimum wage may not reduce jobs and can even raise them.

Sources reviewed: 2026-10-26

References

Robinson, J. (1933). The economics of imperfect competition. Macmillan. The classic that coined the term.
Manning, A. (2003). Monopsony in motion: Imperfect competition in labor markets. Princeton University Press. Modern dynamic monopsony.
Card, D., & Krueger, A. B. (1994). Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. American Economic Review, 84(4), 772–793. The minimum wage study that revived the debate.
Staiger, D. O., Spetz, J., & Phibbs, C. S. (2010). Is there monopsony in the labor market? Evidence from a natural experiment. Journal of Labor Economics, 28(2), 211–236. Natural experiment with nurses.
Card, D., Cardoso, A. R., Heining, J., & Kline, P. (2018). Firms and labor market inequality: Evidence and some theory. Journal of Labor Economics, 36(S1), S13–S70. Firm wage-setting and inequality.
Azar, J., Marinescu, I., & Steinbaum, M. (2022). Labor market concentration. Journal of Human Resources, 57(S), S167–S199. Measuring labour market concentration.
Manning, A. (2021). Monopsony in labor markets: A review. ILR Review, 74(1), 3–26. A recent review.

Reports and materials that use this theory (Korean)

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This article was last updated on October 27, 2026. It is based on widely recognized original works and textbooks; when citing it in a paper, please check the original sources listed in the references.