Monopsony and Buyer Power

Buyer power is concerned with how downstream firms can affect the terms of trade with upstream suppliers. There are two types of buyer power: monopsony power and bargaining power. The welfare implications, and therefore the appropriate enforcement policies, of the two types of buyer power are very different. Both result in lower input prices, but the exercise of monopsony power usually results in higher prices downstream. Reductions in input prices in the case of bargaining power are typically beneficial. The delegates discussed those effects as well as the appropriate enforcement policies. They also heard from guest speaker Prof. Roman Inderst, who provided an overview of the sources and consequences of buyer power, metrics and the role of consumer welfare, and buyer power as a defence in merger cases. This document comprises proceedings in the original languages of a Roundtable on Monopsony and Buyer Power held by the Competition Committee in October 2008.