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Monopsony In The Labor Market: Profit Vs. Wage Maximization

Author

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  • Đorđe Šuvaković Olgin
  • Goran Radosavljević

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.

Suggested Citation

  • Đorđe Šuvaković Olgin & Goran Radosavljević, 2007. "Monopsony In The Labor Market: Profit Vs. Wage Maximization," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 52(173), pages 7-35, April - J.
    • Handle: RePEc:beo:journl:v:52:y:2007:i:173:p:7-35
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    More about this item

    Keywords

    Monopsony; Labor Market; Profit Maximization; Wage Maximization;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • D60 - Microeconomics - - Welfare Economics - - - General

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