# Monopsony Power ## Definition Market power held by a dominant buyer who faces many sellers, enabling the buyer to suppress prices, extend payment terms, and impose conditions below what competitive markets would support. In supply chains, monopsony is exercised by large retailers or manufacturers who represent a significant fraction of a supplier's revenue, giving them leverage to dictate terms the supplier cannot credibly refuse. The long-run consequence is supplier margin compression, underinvestment in quality, and supply fragility. ## Source Market Structure in Modern Supply Chains, §Monopsony and Buyer Power ## Supply Chain Domain Market Structure ## VSM Assignment S3* — Monopsony power is exercised through the management control layer: buyers set terms (pricing, payment, specification) that govern the operational relationship. The S3* (audit/control) analogy holds because the buyer uses its inspection and approval rights to enforce compliance with terms extracted through buyer power. ## WoN Concept Combination of Masters — Smith describes the combination of masters as the coordinated exercise of employer power to suppress wages below their competitive level. Monopsony power in modern supply chains operates through the same mechanism: a concentrated buyer (or buyers acting in parallel) systematically extracts value from fragmented suppliers, just as Smith's combination of masters extracted value from fragmented workers. The parallel is structural: in both cases, one side of the market is coordinated and the other is atomistic, enabling systematic suppression of returns.