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Minimum wages and welfare in a Hotelling duopsony

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  • Leo Kaas

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  • Paul Madden

    ()

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Abstract

Two firms choose locations (non-wage job characteristics) on the interval [0,1] prior to announcing wages at which they employ workers who are uniformly distributed; the (constant) marginal revenue products of workers may differ. Subgame perfect equilibria of the two-stage location-wage game are studied under laissez-faire and under a minimum wage regime. Up to a restriction for the existence of pure strategy equilibria, the imposition of a minimum wage is always welfare-improving because of its effect on non-wage job characteristics.

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File URL: http://hdl.handle.net/10.1007/s00199-008-0412-2
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 43 (2010)
Issue (Month): 2 (May)
Pages: 167-188

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Handle: RePEc:spr:joecth:v:43:y:2010:i:2:p:167-188

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Related research

Keywords: Hotelling; Duopsony; Minimum wages; D43; E24; J48;

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References

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  1. Delfgaauw, Josse, 2007. "The effect of job satisfaction on job search: Not just whether, but also where," Labour Economics, Elsevier, vol. 14(3), pages 299-317, June.
  2. Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-40, May.
  3. Meagher, Kieron J. & Zauner, Klaus G., 2004. "Product differentiation and location decisions under demand uncertainty," Journal of Economic Theory, Elsevier, vol. 117(2), pages 201-216, August.
  4. V. Bhaskar & Ted To, 1999. "Oligopsony and the Distribution of Wages," Labor and Demography 9903003, EconWPA.
  5. Kaas, Leo & Madden, Paul, 2006. "Holdup in Oligopsonistic Labour Markets: A New Role for the Minimum Wage," IZA Discussion Papers 2043, Institute for the Study of Labor (IZA).
  6. Ziss, Steffen, 1993. "Entry deterrence, cost advantage and horizontal product differentiation," Regional Science and Urban Economics, Elsevier, vol. 23(4), pages 523-543, September.
  7. Kieron Meagher & Klaus Zauner, 2005. "Location-then-price competition with uncertain consumer tastes," Economic Theory, Springer, vol. 25(4), pages 799-818, 06.
  8. V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996.
  9. Frank Walsh, 2003. "Comment on 'minimum wages for ronald mcdonald monopsonies: a theory of monopsonistic competition'," Economic Journal, Royal Economic Society, vol. 113(489), pages 718-722, 07.
  10. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
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Citations

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Cited by:
  1. Paul Madden, 2010. "Gametheoretic analysis of basic team sports leagues," The School of Economics Discussion Paper Series 1006, Economics, The University of Manchester.
  2. Philipp Kircher & Gabor Virag & Manolis Galenianos, 2009. "Market Power and Efficiency in a Search Model," 2009 Meeting Papers 519, Society for Economic Dynamics.
  3. Domenico Tabasso, 2009. "Temporary Contracts and Monopsony Power in the UK Labour Market," Economics Discussion Papers 675, University of Essex, Department of Economics.
  4. Paul Madden, 2009. "Modelling strategic interactions in sport leagues," The School of Economics Discussion Paper Series 0909, Economics, The University of Manchester.
  5. Kaas, Leo & Madden, Paul, 2008. "Holdup in oligopsonistic labour markets - a new role for the minimum wage," Labour Economics, Elsevier, vol. 15(3), pages 334-349, June.
  6. Manolis Galenianos & Philipp Kircher & Gabor Virag, 2011. "Market power and efficiency in a search model," LSE Research Online Documents on Economics 29706, London School of Economics and Political Science, LSE Library.

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