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Conflict between consumer and worker surpluses under monopoly power

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  • Sato, Susumu

Abstract

Using a simple model of monopoly and monopsony, I examine the effect of a labor-augmenting productivity gain on workers. I show that, although such a productivity gain always increases the output and consumer welfare, a firm with monopoly power may lower the labor demand and worker welfare because of the discrepancy between the marginal product and marginal revenue product of workers. The misalignment between consumer and worker welfare suggests that competition authorities need to be cautious about the potential harm of consumer-benefiting productivity gains on workers when assessing antitrust cases such as mergers.

Suggested Citation

  • Sato, Susumu, 2024. "Conflict between consumer and worker surpluses under monopoly power," Economics Letters, Elsevier, vol. 234(C).
  • Handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523005384
    DOI: 10.1016/j.econlet.2023.111512
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monopoly; Monopsony; Labor-augmenting technology; Consumer welfare standard;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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