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2 - The Economics of Monopsony

Published online by Cambridge University Press:  08 February 2024

Brianna L. Alderman  and
Roger D. Blair
Brianna L. Alderman
Affiliation:
Harvard University, Massachusetts
Roger D. Blair
Affiliation:
University of Florida
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Summary

We begin with the basic economic theory of monopsony. In this chapter, we present the economic models of (1) pure monopsony, (2) the dominant employer, and (3) oligopsony. In these cases, we show that profit maximization results in ill effects for workers. These include reduced compensation, reduced employment, and the redistribution of wealth from workers to employers. We also show that social welfare is reduced below the level that society would have experienced in the absence of monopsony.

Keywords

Monopsonycompetitiondominant buyerwelfare lossLerner indexsocial welfare
Type
Chapter
Information
Monopsony in Labor Markets
Theory, Evidence, and Public Policy
 , pp. 15 - 31
Publisher: Cambridge University Press
Print publication year: 2024

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