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Simple Static Monopsony

In: Monopsonistic Labour Markets and the Gender Pay Gap

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  • Boris Hirsch

    (Friedrich-Alexander-Universität Erlangen-Nürnberg)

Abstract

A good starting point for the discussion of spatial monopsony is a simple static monopsony model in the fashion of Robinson (1969, pp. 211–231), i.e., considering a spaceless market for homogenous labour with a single non-discriminating firm producing a homogenous commodity from its labour input.1 This single firm has not to bother with other firms’ decisions and is unable to pay different wages to its employees. Let 2.1 $$\begin{array}{rcl}{ L}^{s} : = L(w)& &\end{array}$$ denote the firm’s labour supply. Assume that the wage w is the firm’s only instrument to affect the quantity of labour supplied to it and that L is twice continuously differentiable with L′(w) > 0 for all w > 0.2 Since the firm is the single buyer in this labour market, the firm’s labour supply is identical to market labour supply, so that we have both upward-sloping labour supply at the level of the firm and the market. Let in the following w(L) denote the inverse of L(w).

Suggested Citation

  • Boris Hirsch, 2010. "Simple Static Monopsony," Lecture Notes in Economics and Mathematical Systems, in: Monopsonistic Labour Markets and the Gender Pay Gap, chapter 0, pages 11-14, Springer.
    • Handle: RePEc:spr:lnechp:978-3-642-10409-1_2
    DOI: 10.1007/978-3-642-10409-1_2
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