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by ThrustVectoring 3564 days ago
Monopsonies pressing down costs by exerting their sole-buyer power causes deadweight losses (compared to the free-market clearing price). Really the question is whether or not the redistribution from health care providers to the general population is worthwhile -- and if it is, you have to compare the monopsony against levying a specific tax to accomplish the same goal.
1 comments

A specific tax that is pushed down to consumers? So that everyone actually pays more?

Deadweight losses are a joke, if the sole buyer buys too much, they are at a loss. It just does not happen in this sector.

Not too much, but too little. A monopsonist that buys at a lower price than where the market naturally clears will remove more producer surplus than the extra consumer surplus it extracts.

In concrete terms, this means something like "the price of a doctors visit is low enough that a nearby clinic closes down. Even though you were happy to pay the higher price for the convenience, and they were happy to provide service at that price, we no longer get to have that experience."