The effects of minimum wage in inter-regional duopoly competition

Noriaki Matsushima, Kazuki Nishikawa and Jiaying Qiu
Additional contact information
Kazuki Nishikawa: Graduate School of Economics, the University of Osaka
Jiaying Qiu: Graduate School of Economics, the University of Osaka

No 26E003, OSIPP Discussion Paper from Osaka School of International Public Policy, Osaka University

Abstract: A binding minimum wage can raise the regulated firm's profits when labor-market power interacts with product-market competition. We develop a duopoly model in which firms compete in the same product market but hire workers from distinct, geographically segmented labor markets. Because the minimum wage applies only to one firm's labor market, it does not directly raise its rival's costs. With monopsony power, the minimum wage reduces the regulated firm's marginal cost and induces it to expand output, forcing its rival to contract through strategic interaction. Under Cournot competition, this mechanism also increases total employment and consumer surplus.

Keywords: Minimum wage; Monopsony power; Segmented labor markets; Product-market competition (search for similar items in EconPapers)
JEL-codes: C72 J23 J38 J42 L13 (search for similar items in EconPapers)
Pages: 24pages
Date: 2026-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.osipp.osaka-u.ac.jp/archives/DP/2026/DP2026E003.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osp:wpaper:26e003

Access Statistics for this paper

More papers in OSIPP Discussion Paper from Osaka School of International Public Policy, Osaka University Contact information at EDIRC.
Bibliographic data for series maintained by Akiko Murashita ().