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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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Bibliographic 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: 46 pages
Date of creation: Apr 2008
Date of revision:
Publication status: published in: Economic Theory, 2010, 43 (2), 167 - 188
Handle: RePEc:iza:izadps:dp3434

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Keywords: minimum wages; hotelling; duopsony;

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References

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  1. V. Bhaskar & Ted To, 1999. "Oligopsony and the Distribution of Wages," Labor and Demography 9903003, EconWPA.
  2. 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.
  3. 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.
  4. 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.
  5. Bhaskar, V & To, Ted, 1999. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Economic Journal, Royal Economic Society, vol. 109(455), pages 190-203, April.
  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. 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.
  8. 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.
  9. Kieron Meagher & Klaus Zauner, 2005. "Location-then-price competition with uncertain consumer tastes," Economic Theory, Springer, vol. 25(4), pages 799-818, 06.
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Citations

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Cited by:
  1. 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.
  2. 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).
  3. Tabasso, Domenico, 2011. "Temporary Contracts and Monopsony Power in the UK Labour Market," IZA Discussion Papers 5867, Institute for the Study of Labor (IZA).
  4. Manolis Galenianos & Philipp Kircher & Gábor Virág, 2011. "Market Power And Efficiency In A Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 85-103, 02.

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