Monopsony.

Along with the monopoly on the part of the producers (monopoly in the proper sense of the word), there is a monopoly on the part of the buyer - monopsony. The monopsonist buyer is interested and has the opportunity to buy goods at the lowest price.

This situation is typical for the military industry, whose products are purchased exclusively by the state (this applies primarily to strategic weapons). However, the state does not always use this advantage. Much more often, the monopsonic advantage is realized in local markets. For example, the only agricultural processing enterprise in the region imposes monopolistically low procurement prices on farmers.

Rice. 74. Monopsony Model

The equilibrium of a monopsonist firm, which maximizes its profit, is achieved under the universal condition that marginal revenue is equal to marginal cost (MR = MC). If the slope of the supply curve is positive, then the marginal cost curve passes above it (Fig. 74). Then the monopsonist firm, using its power, will reduce the volume of purchases from the equilibrium level QE to QM, which will cause a price decrease from PE to PM. Thus, the costs of a monopsonist to purchase products (as a rule, these are production resources) will be lower than in conditions of perfect competition.

Rice. 75. Map of indifference curves of the buyer-monopsonist

Bilateral monopoly.

Bilateral monopoly is a market structure when a monopolist is opposed by a monopsonist (a single seller faces a single buyer). This is observed, in particular, when a monopolist firm negotiates with an industry trade union about hiring workers (buying and selling labor). An example is the clash between the air traffic controllers' union and the national aviation company.

To consider the model of bilateral monopoly, we use the map of indifference curves. Suppose that one of the monopolists is a seller of goods (resources), and the other is a buyer (owner of money). Let us put on the abscissa axis the number of goods, and on the ordinate axis - the amount of money intended to pay for them (Fig. 75). The indifference curves in this case will be identical to the curves of constant profitability.

Similarly, we will construct maps of indifference curves (constant profitability) for the seller. Let's superimpose these maps mirror to each other so that the buyer's coordinate system starts in the lower left corner, and the seller's - in the upper right (Fig. 76). The result is an "Edgeworth box".

Rice. 76. Bilateral Monopoly

The area of ​​acceptable solutions will be the shaded figure bounded by curves C1 and S1. However, the optimal solutions will be on the TT trades curve (from transaction - trade), which unites the points T1, T2, T3, T4, etc., which are the points of contact of the C and S curves. Any shift along the TT trades curve means a win on one side and damage on the other. Therefore, the problem of bilateral monopoly does not have an unambiguous solution. In practice, the strongest wins.

38. Monopoly and bilateral monopoly in the labor market.

Monopoly - the exclusive right of the state, enterprises, organizations, traders to carry out any economic activity.

Monopoly is the exact opposite of a competitive market. It undermines free competition, the spontaneous market.

There are the following conditions for the emergence of monopolies:

The consumer cannot replace a product produced by a single firm.

The price of the goods is completely controlled by the seller, while other firms cannot produce the goods due to technical, financial, legal and economic barriers.

The objective reasons for monopolies include:

Presence of a single mineral deposit or other economic resource (raw material monopoly)

State regulation in the interests of society of economic demand for certain goods of tobacco, alcohol, weapons

The economic feasibility of competition, when the production of products by one company costs society less than two or more: utilities and technical infrastructure of territories (natural monopoly)

Bilateral monopoly (English, bilateral monopoly) This type of market structure is called such a type of market structure in which there is a single seller (monopolist) on the supply side, and a single buyer (monopsonist) on the demand side. The most common example of a two-sided monopoly is usually considered a "city of one enterprise", in which the demand for labor is presented by the only enterprise in the city, and the supply of labor is carried out by a well-organized and strong trade union.

A bilateral monopoly is understood as such a market structure in which the only seller and the only buyer carry out the purchase and sale of production resources (for the seller, this is finished products). Under a bilateral monopoly, both the buyer and the seller have the ability to control the prices of production resources services .

Pure bilateral monopoly is quite rare. It occurs when a state monopoly company (for example, in alcohol) buys products from a single seller. A bilateral monopoly of this type is often observed in professional sports, where an organization of team owners negotiates with the players' union regarding pay and working conditions for the duration of the contract between them. .

The impact of a price floor set either by unions or by the state in monopsony labor markets is significantly different from that which exists in competitive markets. Under free competition, wages above the equilibrium level will lead to an oversupply of labor. However, this is rarely the case in a monopsony labor market. Rice. Union wages and monopsony employment

39. State policy of labor market regulation. Trade unions and their impact on the labor market.

The socio-economic consequences of unemployment have necessitated government intervention in the labor sphere, which changes labor relations and limits the freedom of market forces. The state creates a system of legislation regulating labor relations (the procedure for hiring and firing, working hours, etc.).

The main objectives of state regulation of the labor market are:

ensuring full employment (that is, the absence of cyclical unemployment while maintaining the "natural rate of unemployment" (frictional and structural forms));

creation of a "flexible labor market" capable of quickly adapting to the conditions of economic development, maintaining manageability and stability.

Two forms of state policy in the labor market:

active - the creation of new jobs, increasing the level of employment and overcoming unemployment through training and retraining of workers;

passive - support for the unemployed through the payment of benefits.

The main measures of active policy (which is a priority in developed countries) include:

stimulation by the state of investments in the economy (a condition for creating jobs);

organization of retraining and retraining of the structurally unemployed;

development of employment services, labor exchanges;

promoting small and family businesses;

state incentives for the provision of jobs by employers to certain groups of the population - youth, the disabled;

facilitating a change of residence to get a job;

international cooperation in solving employment problems; resolving issues related to international labor migration;

job creation in the public sector;

organization of public works.

The state guarantees unemployed citizens:

providing social support;

free medical care.

Trade unions are associations of workers created on the basis of the professional principle, sectoral principle or the principle of working at one enterprise.

The role of trade unions in the labor market must be recognized as positive:

control the employer, preventing him from violating the concluded labor contracts;

control working conditions, forcing firms to improve these conditions, which ultimately leads to a decrease in labor injuries and occupational morbidity;

control the terms of employment contracts between employers and employees, not allowing the employer to include unfair terms in these contracts.

The trade union acts on the labor market as a seller of labor resources, so the labor market turns into an oligopolistic (or monopoly) market. It raises the price of labor, which can lead to unemployment. When the trade union begins to dictate its conditions on the labor market, employers' associations arise. The labor market ceases to be a pure market.

Bilateral monopoly - a situation where there is only one seller (as in a monopoly) and one buyer (as in a monopsony) in the market.

Bilateral monopoly refers to such a market structure in which the only seller and the only buyer buy and sell production resources (for the seller, this is finished products).

With a bilateral monopoly, both the buyer and the seller have the ability to control the prices of services of production resources.

The case of a bilateral monopoly is shown in fig. 40.1. Line S - the labor supply curve, indicating the price of this resource, which must be paid in order to attract a certain amount of services of this resource. Since the firm buying the resource is a monopsony, it will seek to set the price at the wM level necessary to engage the volume of services of the resource corresponding to the intersection of the MIC curve with its firm's MRP curve. Such an intersection occurs at point E1, at which the firm wishes to hire LM units of the resource's services and bids a price of wM currency units per hour of the resource's services, i.e., the price required to attract LM units of the resource's services.

To maximize profit, the monopoly seller will try to set a price that will play the role of an incentive to purchase the volume of services of the resource corresponding to the point where the marginal revenue from the sale of services from the resource sold is equal to the marginal cost of it. In this case, the profit-maximizing price will correspond to point E2, where MR = MC. At this point, the monopoly will want to implement Lu service units of the resource. In order to force the employer to limit the purchase of resource services by a given volume, the monopoly seller will seek to determine a price equal to wu.

Rice. 40.1. Bilateral monopoly

It is quite obvious that there is no equilibrium in this market, since wu > wM and LM

Pure bilateral monopoly is quite rare. It occurs when a state monopoly company (for example, in alcohol) buys products from a single seller.

A bilateral monopoly of this type is often seen in professional sports, where the team owners' organization negotiates with the players' union regarding pay and working conditions for the duration of the contract between them.

The impact of a price floor set either by unions or by the state in monopsony labor markets is significantly different from that which exists in competitive markets. Under free competition, wages above the equilibrium level will lead to an oversupply of labor. However, this is rarely the case in a monopsony labor market (Figure 40.2).

Rice. 40.2. Union wages and monopsony employment

Suppose that all the firms in the city have formed an employers' association and operate as a monopsony. Suppose the workers are not unionized. The monopsonistic cartel is in equilibrium at E1, where MRPL = MICL. The SL curve represents the supply of workers' services. The cartel hires, say, 5,000 hours a day and sets the workers a wage of 4 den. units in hour.

Now suppose that the workers form a union and negotiations with the employers lead to an increase in wages from 4 to 8 denier. units in hour. In such a situation, entrepreneurs, as a rule, reduce the number of employees they hire. But in a monopsony market, firms will hire more labor as long as the wage set by the unions is less than 13 denier. units in hour.

Firms can hire any number of workers at wages set by the union up to 8 denier. units in hour. If firms intend to hire more than 10,000 hours a day, they will have to increase wages to attract more labor. The equilibrium in this case will be established at point E2, where the MRPL will equal the wages offered by the union. Wages set by the union, which monopsonistic firms cannot influence, are for them up to 10,000 hours of employment per day also the marginal cost of labor resources. An agreement with the firm's union would increase the workforce from 5,000 to 7,000 hours a day.

Establishing any wage between 4 and 6 den. units per hour would lead to an increase in employment, since monopsonistic firms want an MRPL equal to this salary. But any wage set by the union below 6 den. units per hour, would cause a decrease in the supply of workers, which would increase wages to 6 den. units

This model can be applied to minimum wages set by the state. Given the supply of unskilled labor in a monopsonistic market, the establishment of a minimum wage is believed to cause an increase rather than a decrease in employment. As long as the government sets the minimum wage below the point at which MRPL = MICL for monopsonists, once the minimum wage is set, they will hire more rather than fewer workers.

G.C. Vechkanov, G.R. Bechkanova

Other related materials

Bilateral monopoly.

ANSWER

BILATERAL MONOPOLY - a situation where there is only one seller (as in a monopoly) and one buyer (as in a monopsony) in the market.

A bilateral monopoly is understood as such a market structure in which the only seller and the only buyer carry out the purchase and sale of production resources (for the seller, this is finished products).

With a bilateral monopoly, both the buyer and the seller have the ability to control the prices of services of production resources.

The case of a bilateral monopoly is shown in fig. 40.1. Line S is the labor supply curve, indicating the price of this resource, which must be paid in order to attract a certain amount of services of this resource. Since the firm buying the resource is a monopsony, it will seek to set a price at the level w M necessary to engage the volume of services of the resource corresponding to the intersection of the MIC curve with its firm's MRP curve. Such an intersection takes place at point E 1; at which the firm is willing to hire E m units of the resource's services and bids w M currency units per hour of the resource's services, i.e., the price required to attract E m units of the resource's services.

To maximize profit, the monopoly seller will try to set a price that will play the role of an incentive to purchase the volume of services of the resource corresponding to the point where the marginal revenue from the sale of services from the resource sold is equal to the marginal cost of it. In this case, the profit-maximizing price will correspond to the point E 2, where MR = MC. At this point, the monopoly will want to sell L U service units of the resource. In order to force the employer to limit the purchase of resource services by a given volume, the monopoly seller will seek to determine a price equal to w U .

Rice. 40.1. Bilateral monopoly

It is quite obvious that there is no equilibrium in this market, because w u > w M and L M< L U . По этой причине сделка не состоится до тех пор, пока не состоится договоренность о цене. По-видимому, цена установится на уровне между w U and w M .

Pure bilateral monopoly is quite rare. It occurs when a state monopoly company (for example, in alcohol) buys products from a single seller.

A bilateral monopoly of this type is often seen in professional sports, where the team owners' organization negotiates with the players' union regarding pay and working conditions for the duration of the contract between them.

The impact of a price floor set either by unions or by the state in monopsony labor markets is significantly different from that which exists in competitive markets. Under free competition, wages above the equilibrium level will lead to an oversupply of labor. However, this is rarely the case in a monopsony labor market (Figure 40.2).

Rice. 40.2. Union wages and monopsony employment

Suppose that all the firms in the city have formed an employers' association and operate as a monopsony. Suppose the workers are not unionized. The monoposonistic cartel is in equilibrium at point E 1; where MRP L = MIC L . The curve S L represents the supply of workers' services. The cartel hires, say, 5,000 hours a day and sets the workers a wage of 4 den. units in hour.

Now suppose that the workers form a union and negotiations with the employers lead to an increase in wages from 4 to 8 denier. units in hour. In such a situation, entrepreneurs, as a rule, reduce the number of employees they hire. But in a monopsony market, firms will hire more labor as long as the wage set by the unions is less than 13 denier. units in hour.

Firms can hire any number of workers at wages set by the union up to 8 denier. units in hour. If firms intend to hire more than 10,000 hours a day, they will have to increase wages to attract more labor. The equilibrium in this case will be established at point E 2 , where MRP L equals the wages offered by the union. Wages set by the union, which monopsonistic firms cannot influence, are for them up to 10,000 hours of employment per day also the marginal cost of labor resources. An agreement with the firm's union would increase the workforce from 5,000 to 7,000 hours a day.

Establishing any wage between 4 and 6 den. units per hour would lead to an increase in employment, since monopsonistic firms want to have an MRP L equal to this salary. But any wage set by the union below 6 den. units per hour, would cause a decrease in the supply of workers, which would increase wages to 6 den. units

This model can be applied to minimum wages set by the state. Given the supply of unskilled labor in a monopsonistic market, the establishment of a minimum wage is believed to cause an increase rather than a decrease in employment. As long as the government sets the minimum wage below the point at which MRP L = MIC L for monopsonists, once the minimum wage is set, they will hire more rather than fewer workers.