Minimum Wages and Welfare in a Hotelling Duopsony

Leo Kaas () and Paul Madden ()
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Paul Madden: University of Manchester

No 3434, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: Two firms choose locations (non-wage job characteristics) on the interval [0,1] prior to announcing wages at which they employ workers who are uniformly distributed; the (constant) marginal revenue products of workers may differ. Subgame perfect equilibria of the two-stage location-wage game are studied under laissez-faire and under a minimum wage regime. Up to a restriction for the existence of pure strategy equilibria, the imposition of a minimum wage is always welfare-improving because of its effect on non-wage job characteristics.

Keywords: minimum wages; duopsony; hotelling (search for similar items in EconPapers)
JEL-codes: D43 E24 J48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab, nep-mac and nep-mic
Date: Written 2008-04
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Forthcoming in: Economic Theory, 2008

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http://ftp.iza.org/dp3434.pdf (application/pdf)

Related works:
Working Paper: Minimum Wages and Welfare in a Hotelling Duopsony (2006)
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