From Public Monopsony to Competitive Market: More Efficiency but Higher Prices

Josse Delfgaauw and Robert Dur

No 1095, CESifo Working Paper Series from CESifo

Abstract: This paper examines the consequences of creating a fully competitive market in a sector previously dominated by a cost-minimising public firm. Workers in the economy are heterogeneous in their motivation to work in the sector. In line with empirical findings, our model implies that firms in the competitive market provide stronger monetary incentives to workers, reach higher productivity, and employ less workers than the public firm. Allocative efficiency therefore increases. Nevertheless, prices of the sector’s output rise as competition between private firms for the best motivated workers leads to higher wage cost than under the public monopsony. Political support for liberalisation may therefore be limited.

Keywords: liberalisation; monopsony power; incentive wages; intrinsic motivation (search for similar items in EconPapers)
JEL-codes: H40 J30 J40 L20 L30 L50 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: From public monopsony to competitive market: more efficiency but higher prices (2009)
Working Paper: From Public Monopsony to Competitive Market: More Efficiency but Higher Prices (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1095

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