The Determination of Wages and Employment


    The Determination of Wages and Employment

    For monopsonists and oligopsonists to employ more workers, they have to increase the wase rate .

    Bilateral Monopoly

    • When a trade union negotiates with a monopsonists employer, the situation is referred to as a bilateral monopoly
      • A bilateral monopoly is a market with a single buyer and seller
    • In this case, the wage rate will be determined by the relative bargaining strength of the two sides
      • If the monopsonists is very powerful, the outcome will be a wage rate close to that which the monopsonists would have chosen to pay without any union intervention (low rate)
      • The stronger the union is, the closer the wage rate is likely to be to the upper limit
        • However, the union must take into account the adverse effect that pushing up the wage may have on the quantity of labour demanded


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