PSA: Monopoly, Monopsony, and Amazon
What with Amazon beating up another supplier today, I thought it would be useful to take a few minutes and comment on the way in which many people are misusing the word monopoly.
Many people like to throw around the label monopoly when talking about Amazon. Given that Amazon has somewhere around a third of the US book market, that claim is questionable at best, but when you point at Amazon mistreating their suppliers and call them a monopolist it is simply untrue.
If you want to complain about Amazon having power over their suppliers, what you should be calling them is a monopsonist. The difference is pretty simple. A monopoly is a market in which there is only one seller, while a monopsony is a market with only a single buyer.
- Monopoly – in economic theory, a market situation in which there is only one seller.
- Monopsony – in economic theory, a market situation in which there is only one buyer.
I know that some of you are thinking that Amazon is using their monopoly position in the retail market as a club to bully a supplier, in which case you can still say they are using their monopoly power. You could say that, but I think it is better to use the right word.
Plus I just happened to like words, and since the topic of monopolies and monopsonies came up today I thought it would be fun to share the definitions.