Transcript Monopsony & Bilateral Monopoly Labor Markets

Monopsony, Unions, & Bilateral
Monopoly Labor Markets
Imperfectly Competitive Labor Markets
Monopsony Model
 Critical Attributes of Monopsony Labor Markets:
There is a single buyer of a certain labor type
Movement of labor is restricted, either
geographically or because workers would have to
acquire new skills
The employer is a “wage maker,” because the wage
rate it must pay varies directly with the number of
workers it employs
Graphing Monopsony

Upward sloping supply curve
S = ARC
The more workers a firm attempts to employ the higher the
wage they must offer

MRC is higher than the wage
If monopsonists increase wages, they must do so for all
workers they employ

Equilibrium wage & employment
Monopsonists hire the quantity of workers at MRC = MRP, at
the wage on the supply curve directly below MRC = MRP
Unions
 Union: a cooperative collective of laborers
 Unions usually seek to raise wages
Demand enhancement (increase product demand,
increase productivity, or change the price of other
inputs)
Exclusion (reduce the supply of labor)
Inclusion (increase the size of the union)
 Unions typically achieve higher wage rates, but
at lower levels of employment
 Unions shift the MRC & supply curve and/or
demand curve (remember: D = MRP)
Union Demand Enhancement
Exclusive Unionism
Inclusive Unionism
Bilateral Monopoly
A monopsonistic labor
market that is unionized
 Example: the auto
industry
 Indeterminate outcome
…depending on
bargaining between the
union and employer…
between Wm and Wu

Practicing Imperfectly
Competitive Labor Markets
 Workbook Unit 4 Lesson 3 Activity 49
 Homework: Chapter 26 #2, 3, 7, 8, 9