Long-Run Spatial Monopsony

Boris Hirsch ()
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Boris Hirsch: Friedrich-Alexander-Universität Erlangen-Nürnberg

Chapter Chapter 4 in Monopsonistic Labour Markets and the Gender Pay Gap, 2010, pp 49-94 from Springer

Abstract: Abstract In the following, we will deal with long-run spatial monopsony. As stated in assumption (A7), we consider the model’s outcomes – discussed for fixed market areas in Chapter 3 – when free entry of firms drives profits to zero. In other words, we solve the model for the zero-profit equilibrium. Hence, firms’ market radius becomes an endogenous outcome of the model. Nevertheless, we already have the central building blocks of the long-run model at hand: The results gained from the analysis carried out in Chapter 3 still determine firms’ optimal wage-setting behaviour within a market area of a given radius. To close the model, we just have to impose a zero-profit condition. Together, optimal (short-run) wage setting and the zero-profit condition then determine the long-run equilibrium wage–market radius pair.

Keywords: Labour Supply; Travel Cost; Market Area; Equilibrium Wage; Conjectural Variation (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-10409-1_4

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DOI: 10.1007/978-3-642-10409-1_4

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