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Minimum Wages and Welfare in a Hotelling Duopsony

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  • L. Kaas
  • P. 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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Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 0604.

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Date of creation: 2006
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Handle: RePEc:man:sespap:0604

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  1. Ziss, Steffen, 1993. "Entry deterrence, cost advantage and horizontal product differentiation," Regional Science and Urban Economics, Elsevier, vol. 23(4), pages 523-543, September.
  2. Venkataraman Bhaskar & Ted To, 1999. "Oligopsony and the Distribution of Wages," CIRJE F-Series CIRJE-F-42, CIRJE, Faculty of Economics, University of Tokyo.
  3. Josse Delfgaauw, 2005. "The Effect of Job Satisfaction on Job Search: Not just whether, but also where," Tinbergen Institute Discussion Papers 05-097/1, Tinbergen Institute.
  4. 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.
  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. 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.
  7. 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.
  8. Kieron Meagher & Klaus Zauner, 2005. "Location-then-price competition with uncertain consumer tastes," Economic Theory, Springer, vol. 25(4), pages 799-818, 06.
  9. 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).
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Cited by:
  1. Tabasso, Domenico, 2011. "Temporary Contracts and Monopsony Power in the UK Labour Market," IZA Discussion Papers 5867, Institute for the Study of Labor (IZA).
  2. Galenianos, Manolis & Kircher, Philipp & Virag, Gabor, 2009. "Market Power and Efficiency in a Search Model," MPRA Paper 17093, University Library of Munich, Germany.
  3. 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).

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