Legal Definitions - duopsony

Duopsony describes a market condition where there are only two primary buyers for a particular product or service.

In a duopsony, the two buyers hold significant influence over the market because sellers have very limited options for who they can sell their goods or services to. This market structure is the opposite of a duopoly, which refers to a market with only two sellers.

• Example 1: Specialized Industrial Components

  Consider a company that manufactures an extremely specialized type of high-performance optical lens, essential for a new generation of advanced scientific telescopes. Globally, only two major aerospace and defense contractors are developing and building these cutting-edge telescopes. As a result, these two contractors are the sole purchasers of this unique optical lens from the manufacturing company.

  This scenario illustrates a duopsony because the optical lens manufacturer has only two potential buyers for its highly specialized product.

• Example 2: Niche Agricultural Produce

  Imagine a specific region where farmers cultivate a rare variety of medicinal herb, known for its unique properties in treating a particular ailment. Only two pharmaceutical companies worldwide possess the necessary research and development capabilities, as well as the regulatory approvals, to process this herb into a marketable drug. These two companies are therefore the exclusive buyers of this herb from the local farmers.

  Here, the farmers face a duopsony because there are only two pharmaceutical companies interested in purchasing their specialized crop.

• Example 3: Highly Specialized Labor Market

  In a particular metropolitan area, there are only two major technology firms that require engineers with an extremely niche skill set in quantum cryptography for their secure communication projects. While other tech companies exist in the area, none have a need for this specific, advanced expertise. Therefore, individuals possessing these unique quantum cryptography skills have only these two firms as potential employers in that local market.

  This demonstrates a duopsony in the labor market, as individuals with this very specific skill set have only two potential buyers (employers) for their labor.