Simple Dynamic Monopsony

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

Chapter Chapter 7 in Monopsonistic Labour Markets and the Gender Pay Gap, 2010, pp 133-136 from Springer

Abstract: Abstract The discussion of spatial monopsony in Part I descended from the simple static monopsony model, extending its argument to economic space with significant travel cost. The next step was to introduce spatial competition by considering equidistantly distributed firms in space setting wages under conditions of strategic interaction. In line with the spatial economics literature, e.g., Capozza and Van Order (1978) and Greenhut et al. (1987), we labelled this situation as the ‘short run’ as opposed to the ‘long run’ where firms’ profits are driven to zero because of free entry. Apart from this labelling, however, there were no explicit dynamics considered, the reasoning was purely static. Things are different in models of equilibrium search theory with wage posting which explicitly take account of the labour market’s dynamics. We therefore follow Boal and Ransom (1997) and Manning (2003a) in regarding these and related models as models of dynamic monopsony. Unsurprisingly, a good starting point for the following analysis of dynamic monopsony in this sense is a simple dynamic model of pure monopsony which we will set up now.1

Date: 2010
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DOI: 10.1007/978-3-642-10409-1_7

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