Labor Monopoly and Monopsony Lectures in Microeconomics-Charles W. Upton
The Monopoly • Suppose we have a a monopoly industry. Labor Monopoly and Monopsony
The Monopoly • Suppose we have a a monopoly industry. • The firm still has a MPP curve Labor Monopoly and Monopsony
The Monopoly • Suppose we have a a monopoly industry. • The firm still has a MPP curve • However we are not interested in VMP = MPP * P • But MRP = MPP *MR Labor Monopoly and Monopsony
The Monopoly • The monopolist’s demand function is determined by MRP, not VMP. wo MRP= MPP x MR Labor Monopoly and Monopsony Lo
The Monopoly • The monopolist’s demand function is determined by MRP, not VMP. wo • Since MRP= MPP x MR MR < P, MRP < VMP. Labor Monopoly and Monopsony Lo
The Monopsonist • A monopoly is a sole seller; a monopsonist is a sole buyer. Labor Monopoly and Monopsony
The Monopsonist • A monopoly is a sole seller; a monopsonist is a sole buyer. • As a monopolist worries about MR, a monopsonist worries about MCF Labor Monopoly and Monopsony
w The Monopsonist S wo Labor Monopoly No Monopsony and N
w The Monopsonist S w* wo Labor Monopoly No Monopsony and N* N
The Monopsonist S w* wo No Labor Monopoly and N* Monopsony
The Monopsonist MCF VMP S w VMP Labor Monopoly N Monopsony and
The Monopsonist/Monopolist MCF VMP S MRP w MRP N* Labor Monopoly N Monopsony and VMP
The Monopsonist/Monopolist MCF VMP MRP w MRP N* Labor Monopoly N Monopsony and Equilibrium S if both markets are competitive VMP
The Monopsonist/Monopolist MCF VMP MRP w MRP N* Labor Monopoly N Monopsony and Equilibrium S if both markets are competitive Monopolist with competitive VMP labor market
The Monopsonist/Monopolist MCF Equilibrium S if both Competitive markets market withare competitive monopsony Monopolist labor market with competitive VMP labor market MRP VMP MRP w N* Labor Monopoly N Monopsony and
The Monopsonist/Monopolist MCF Equilibrium S if both Competitive markets market withare competitive monopsony Monopolist Monopoly labor market with competitive VMP monopsony labor market MRP labor market VMP MRP w N* Labor Monopoly N Monopsony and
The Monopsonist/Monopolist MCF VMP S MRP w MRP N* Labor Monopoly N Monopsony and VMP
Two Issues • Is this exploitation? Labor Monopoly and Monopsony
Two Issues • Is this exploitation? – In the sense that the workers are not being paid the VMP, it is. Labor Monopoly and Monopsony
Two Issues • Is this exploitation? • Price Discrimination Labor Monopoly and Monopsony
Two Issues • Is this exploitation? – In the sense that the workers are not being paid the VMP, it is. • Price Discrimination – Confidential salaries – Moving expenses and hiring bonuses Labor Monopoly and Monopsony
End © 2006 Charles W. Upton Labor Monopoly and Monopsony
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