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Monopsony Power in the Gig Economy

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  • Jack Fisher

Abstract

Many workers provide services for customers via digital platforms that may exert monopsony power. Typical expositions of this phenomenon are inapplicable because platforms post prices to both sides of a two-sided market, and platform-specific labor supply is hard to measure when workers multi-app. This paper develops a model of a typical gig labor market that deals with these issues. Platforms exploit monopsony power to markup their commission rate and reduce equilibrium wages. A worker union sets the first-best commission rate when the customer market is competitive. I estimate the model using public data, including causal estimates from the literature on Uber’s US ridesharing marketplace. The results imply the platform exploits labor market power to depress drivers’ earnings but faces competition for passengers. An optimally set commission cap raises wages by 14 percent, but minimum wages on utilized hours harm workers.

Suggested Citation

  • Jack Fisher, 2024. "Monopsony Power in the Gig Economy," CESifo Working Paper Series 11444, CESifo.
    • Handle: RePEc:ces:ceswps:_11444
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    References listed on IDEAS

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