MONOPSONY IN THE LABOR MARKET: PROFIT VS. WAGE MAXIMIZATION

Đorđe Šuvaković Olgin and Goran Radosavljević

Economic Annals, 2007, vol. 52, issue 173, 7-35

Abstract: This paper compares the efficiency of profit- and wage-maximizing (PM and WM) monopsony in the labor market. We show that, both locally and globally, a PM monopsony may well be dominated by its WM twin, where the local and global dominance are defined with respect to a single (inverse) labor supply function and a single family of such functions. This family is always divided in the two disjoint (sub)families of the PM and WM dominance. We also analyze some major factors that explain the size of these (sub)families.

Keywords: Monopsony; Labor Market; Profit Maximization; Wage Maximization (search for similar items in EconPapers)
JEL-codes: D60 J42 L21 (search for similar items in EconPapers)
Date: 2007
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