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Factor market oligopsony and the location decision of free entry oligopoly

Author

Listed:
  • Chiung-I Hwang

    (Department of Economics, San Jose State University)

  • Yeung-Nan Shieh

    (Department of Economics, San Jose State University)

Abstract

This paper examines the impact of oligopsony power on the location decision of undifferentiated oligopolistic firms with free entry. In the case where the distance of an oligopolistic firm from the output market is held constant, it shows that the optimum location moves away from the oligopsonistic input market if the demand function and the labor supply function are linear. In the case where the distance of an oligopolistic firm from the output market is a decision variable, it shows that the optimum location may not move toward the output market as demand increases if the demand function is convex. These results are significantly different from the conventional results based on the perfectly competitive factor market. It indicates that the presence of oligopsony power has important influence on the location decision of oligopolistic firms.

Suggested Citation

  • Chiung-I Hwang & Yeung-Nan Shieh, 2007. "Factor market oligopsony and the location decision of free entry oligopoly," Economics Bulletin, AccessEcon, vol. 18(6), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-06r30002
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume18/EB-06R30002A.pdf
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    References listed on IDEAS

    as
    1. Chiou‐Nan Yeh & Chao‐Cheng Mai & Yeung‐Nan Shieh, 1996. "Location And The Theory Of Production Under Monopsony," Papers in Regional Science, Wiley Blackwell, vol. 75(4), pages 433-440, October.
    2. Mai, Chao-cheng & Hwang, Hong, 1992. "Production-location decision and free entry oligopoly," Journal of Urban Economics, Elsevier, vol. 31(2), pages 252-271, March.
    3. Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring.
    4. Yeung-Nan Shieh & Chao-Cheng Mai, 1997. "Demand and location decision of a monopsonistic firm," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 31(3), pages 273-284.
    5. Yeung-Nan Shieh & Chiou-Nan Yeh, 2004. "Transportation rates, monopsony power and the location decision of the firm," Economics Bulletin, AccessEcon, vol. 18(1), pages 1-7.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Yeung-Nan Shieh, 2013. "Effects of ad-valorem taxes on location decision under free entry Cournot oligopoly," Economics and Business Letters, Oviedo University Press, vol. 2(1), pages 5-12.

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    More about this item

    Keywords

    Free entry oligopoly;

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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