Imperfect Labour Markets

Imperfect Labour Markets

Imperfect labour markets

Firms with monopsony power in labour market

Monopsony £

MCL

ACL ≡ W (supply curve)

W2 W1

MRPL O

Q1 Q of labour

Q2

Imperfect labour markets

Union facing competitive employers

£ W2

Monopoly union facing producers under perfect competition S Unemployment

W1

D O

Q2

Q1

Q3

Q of labour

Imperfect labour markets

Bilateral monopoly

Bilateral monopoly £

S1 (=ACL1)

MCL1

Monopsony: no union

W1

No un

ion

n

N

o

o ni

u

MRPL O

Q1

Q of labour

Bilateral monopoly £

MCL1

x

W2

S1 (=ACL1) MCL2 = ACL2 Bilateral monopoly

W1

No un

ion

n

N

o

o ni

u

MRPL O

Q1

Q3

Q of labour

Bilateral monopoly £

MCL1

W2

x

MCL2 = ACL2 Wage can rise to W2 with no fall in employment

W1

MRPL O

Q1

Q of labour

Bilateral monopoly £

MCL1

x

W2

MCL3 = ACL3

W3

Wage can rise from W1 to W3 and employment rises to Q2

W1

MRPL O

Q1

Q2

Q of labour