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Asymmetric market power and wage suppression

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  • Tomer Blumkin
  • David Lagziel

Abstract

We study a labor market in which two identical firms compete over a pool of homogeneous workers. Firms pre‐commit to their outreach to potential employees, either through their informative advertising choices, or through their screening processes, before engaging in a wage (Bertrand) competition. Although firms are homogeneous, the unique pure‐strategy equilibrium is asymmetric: one firm maximizes its outreach whereas the other compromises on a significantly smaller market share. The features of the asymmetric equilibrium extend to a general oligopsony with any finite number of firms.

Suggested Citation

  • Tomer Blumkin & David Lagziel, 2024. "Asymmetric market power and wage suppression," Scandinavian Journal of Economics, Wiley Blackwell, vol. 126(1), pages 38-59, January.
    • Handle: RePEc:bla:scandj:v:126:y:2024:i:1:p:38-59
    DOI: 10.1111/sjoe.12545
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