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Minimum Wages and Welfare in a Hotelling Duopsony

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Author Info
Kaas, Leo () (University of Konstanz)
Madden, Paul () (University of Manchester)

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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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3434.

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Length: 2008 pages
Date of creation: Apr 2008
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Publication status: forthcoming in: Economic Theory, 2008
Handle: RePEc:iza:izadps:dp3434

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Related research
Keywords: duopsony; minimum wages; hotelling;

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!]
    Other versions:
  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. [Downloadable!] (restricted)
  3. Bhaskar, V. & To, Ted, 2003. "Oligopsony and the distribution of wages," European Economic Review, Elsevier, vol. 47(2), pages 371-399, April. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Leo Kaas & Paul Madden, 2006. "Holdup in Oligopsonistic Labour Markets: A New Role for the Minimum Wage," IZA Discussion Papers 2043, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. 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. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul Madden, 2009. "Modelling strategic interactions in sport leagues," The School of Economics Discussion Paper Series 0909, Economics, The University of Manchester. [Downloadable!]
  2. Galenianos, Manolis & Kircher, Philipp & Virag, Gabor, 2009. "Market Power and Efficiency in a Search Model," MPRA Paper 17093, University Library of Munich, Germany. [Downloadable!]
  3. Domenico Tabasso, 2009. "Temporary Contracts and Monopsony Power in the UK Labour Market," Economics Discussion Papers 675, University of Essex, Department of Economics. [Downloadable!]
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