NASA is soliciting proposals from private companies to build a new rocket in 1960. Companies should submit a 5 part proposal including price. NASA will be the sole purchaser of rockets.

1. With your partner
Its 1960, and NASA is going
to be buy a rocket and
soliciting proposals with
private companies to build a
the new rocket. NASA will be
the ONLY buyer of rockets.
Put together a 5 part
proposal, including price, for
the project for NASA to buy.

2. Pricing power
• 1st case, very fast, who has pricing power
– 2 sources of that power (I think there are really 3)
• 2nd case, longer, who has the pricing power?

3. How is this different than the other 4
market structures we learned?
• Buyers/sellers
• Barriers to entry
• information
• Oligopoly
• Perfect Competition
• Monopolistic competition
• Monopoly

4. Monopsony Market structure
• Somewhat rare
• Many sellers, only 1 buyer
• Few barriers to enter supply
market
• Very expensive or special
products being purchased
• Monopsony power comes from
size of the firm, bigger the more
buying power, lower prices for
buyer
• “Market share”

5. Monopsony Market Examples
• Larger employer, small town
– Mining towns like Morenci,
Winkelman and Bisbee
• Baseball players before 1974
• https://www.youtube.com/wa
tch?v=frYAvrnFxko

6. Monopsony Market Examples
• Amazon on book market (70%)
• Walmart on clothing & goods
• Healthcare in United Kingdom
– Market in USA?
• Firms with considerable
economies of scale
• How could sellers work to
increase price of their factor?