Lecture 6 - Lecture Lecture 6 Monopsony Roadmap Roadmap...

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ecture 6 Lecture 6 Monopsony
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oadmap Roadmap onopsony Monopsony • Profit Maximization and Monopsony • Minimum Wages and Monopsony • Welfare Implications of Monopsony
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Why might labor supply to an industry be upwards sloping? • To hire a new worker an industry y needs to (1) attract new workers to the industry and (2) pay the new orker worker. creasing the wage a little may • Increasing the wage a little may attract a few more workers, but only those that are very mobile. To attract even more workers, you have to overcome these “frictions” y offering an even higher wage by offering an even higher wage.
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Monopspony: • From Ancient Greek (monos) “single” + (ops ō nia) “purchase” •E x a m p l e : – Wal-Mart (its buying power for given item may dwarf the a given item may dwarf the remaining market). – Local Team for Baseball players – Local Hospital for Nurses – Local University for College Professors
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The Labor Market In The Labor Market • Monopspony : When firms are large relative to the market so that they face an upwards sloping labor supply curve. o hire an additional worker a • To hire an additional worker, a monopsonist must increase the wage. ince this higher wage applies to all units Since this higher wage applies to all units (all previous workers get a raise), the arginal expense is higher than the new marginal expense is higher than the new wage paid.
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eXsu*mple • How many of you will proofread my slides? – OK…. Lets take bids on the wage. I will take the lowest wage bid and hire that person.
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This note was uploaded on 01/09/2010 for the course ILRLE 2400 at Cornell.

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Lecture 6 - Lecture Lecture 6 Monopsony Roadmap Roadmap...

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