Lectures in Microeconomics-Charles W. Upton Labor Monopoly and Monopsony

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. wowo LoLo MRP= MPP x MR

Labor Monopoly and Monopsony The Monopoly The monopolist’s demand function is determined by MRP, not VMP. Since MR < P, MRP < VMP. wowo LoLo MRP= MPP x MR

Labor Monopoly and Monopsony 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 The Monopsonist w N S NoNo wowo

Labor Monopoly and Monopsony The Monopsonist w N S w* wowo N*NoNo

Labor Monopoly and Monopsony The Monopsonist wowo NoNo w* N* S

Labor Monopoly and Monopsony The Monopsonist w N S VMP MCF VMP

Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N*

Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive

Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive Monopolist with competitive labor market

Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive Monopolist with competitive labor market Competitive market with monopsony labor market

Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive Monopolist with competitive labor market Competitive market with monopsony labor market Monopoly market with monopsony labor market

Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N*

Labor Monopoly and Monopsony 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