Monopsony Not Amazon Analysis

Assignment 1: Ethics and Technology

Introduction

When analyzing the market, one must consider the power that buyers and sellers have. When a seller controls all of the power it is considered a monopoly, they are able to “raise [their] price above competitive levels” which makes it unfair for consumers in a market as they are only given the option to buy from that particular seller regardless of the prices they impose (Stucke, 2013 p. 1510). When a buyer controls all of the power it is considered a monopsony, here the buyer “can lower the price[s] below competitive levels for the goods and services it buys” (Stucke, 2013 p. 1510). The action a buyer takes to lower the prices can also be considered unfair to the supplier, this can “reduce the

Is this fair? The repercussions that a monopsony can create can have a negative impact on their suppliers and the market as a whole; Paul Krugman made it very obvious in his article “Monopsony Is Not O.K.” states that “the giant online retailer, has too much power and uses that power in ways to hurt America”. This might be slightly abrupt and forward, however it is his opinion of the buying power that Amazon has. Monopsonies “can impose significant economic, social and moral harms”. Ultimately the power that a monopsony has can be negative, and is unfair to the suppliers, as they are forced to lower their prices beyond their control which can negatively impact their organization and

1614). The courts have already interfered with monopsonies, setting precedents on cases such as Mandeville Island Farms v. American Crystal Sugar Co., which stated that “collusive monopsonies – are illegal, even where harm to consumers is neither shown nor alleged” (Alexander, 2007 p. 1622). Even with such precedents set through the courts, “the legal standards for monopsony claims are [still] less developed than for monopoly claims (Stucke, 2013 p. 1513). Ways that government might intervene and pose interference with monopsony is passing legislation to control mergers and imposing price and profit regulations, such as setting a minimum price level.

Consequences of Government Interference With any type of government interference, there may be consequences that arise, these include hefty fines imposed on businesses that fail to comply with new legislation, as well as the cost of regulating and follow up with any price controls that are set up. The consequences of government interference could negatively impact the economy and consumers as whole. It is a delicate matter, having the government come in and regulate trade, imposing price restrictions and so forth. Understanding the consequences that allowing