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The effects of minimum wage in inter-regional duopoly competition

Author

Listed:
  • Noriaki Matsushima

    (Osaka School of International Public Policy, the University of Osaka)

  • Kazuki Nishikawa

    (Graduate School of Economics, the University of Osaka)

  • Jiaying Qiu

    (Graduate School of Economics, the University of Osaka)

Abstract

A binding minimum wage can raise the regulated firm's profits when labor-market power interacts with product-market competition. We develop a duopoly model in which firms compete in the same product market but hire workers from distinct, geographically segmented labor markets. Because the minimum wage applies only to one firm's labor market, it does not directly raise its rival's costs. With monopsony power, the minimum wage reduces the regulated firm's marginal cost and induces it to expand output, forcing its rival to contract through strategic interaction. Under Cournot competition, this mechanism also increases total employment and consumer surplus.

Suggested Citation

  • Noriaki Matsushima & Kazuki Nishikawa & Jiaying Qiu, 2026. "The effects of minimum wage in inter-regional duopoly competition," OSIPP Discussion Paper 26E003, Osaka School of International Public Policy, Osaka University.
    • Handle: RePEc:osp:wpaper:26e003
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    File URL: https://www.osipp.osaka-u.ac.jp/archives/DP/2026/DP2026E003.pdf
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    More about this item

    Keywords

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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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