Holdup in oligopsonistic labour markets - a new role for the minimum wage

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Holdup in Oligopsonistic Labour Markets: A New Role for the Minimum WageLeo Kaas Paul Madden The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. ABSTRACT Holdup in Oligopsonistic Labour Markets: A New Role for the Minimum WageWe consider a labour market model of oligopsonistic wage competition and show that there is a holdup problem although workers do not have any bargaining power. When a firm invests more, it pays a higher wage in order to attract workers from competitors. Because workers participate in the returns on investment while only firms bear the costs, investment is inefficiently low. A binding minimum wage can achieve the first-best level of investment, both in the short run for a given number of firms and in the long run when the number of firms is endogenous.JEL Classification: D43, J48

Game Theoretic Analysis of Basic Team Sports Leagues

“…The modeling of duopsony in this article is novel. Existing literature on oligopsony has focused on models where jobs are differentiated in the eyes of workers, with Bertrand wage-setting firms (Bhaskar & To, 1999Kaas & Madden, 2008. Here, jobs are undifferentiated in this sense and firms choose expenditures on labor-players receive the same salary (¼the product of their talent level and the wage for talent) wherever they play and are indifferent as to which club they play for.…”

The macroeconomic consequences of raising the minimum wage: Capital accumulation, employment and the wage distribution

“…Moreover, our model considers a richer set of strategic interactions between workers, the firm and capital. Similarly, Kaas and Madden (2008) illustrate the beneficial effects of a minimum wage for capital investment in the context of an oligopsonistic model, but they do not obtain a positive effect on employment.…”

Volume and share quotas in Cournot competition

“…To (1999, 2003) and Kaas and Madden (2008) analyze the effects of minimum wages in a wage competition model. Their models are oligopsonistic wage competition models in which strategy spaces of firms are restricted.…”