THREAD on #monopsony and #antitrust implications
1. Intellectual foundations back to work of Joan Robinson (1933) – eminent woman economist btw, too often neglected. She became full professor only in 1965 – 6 years before retiring
1. Intellectual foundations back to work of Joan Robinson (1933) – eminent woman economist btw, too often neglected. She became full professor only in 1965 – 6 years before retiring
2. Here’s the theory :
-In a competitive labour market, each worker receives her/his marginal product
-Labour supply is upward sloping: need to pay more to attract more workers
-If a single firm buys inputs, will try to BUY LESS in order to drive WAGES DOWN
-In a competitive labour market, each worker receives her/his marginal product
-Labour supply is upward sloping: need to pay more to attract more workers
-If a single firm buys inputs, will try to BUY LESS in order to drive WAGES DOWN
3. More and more evidence I cannot review here, coming from terrific work of @joseazar @mioana @Econ_Marshall @glenweyl @Alan_Krueger @arindube et al. Most comes from US data, but also Europe e.g. Silvana Tenreyro et al.
4. Merges
One can run equivalent analysis to standard cases in final product markets, with different set of labels. See figure below
One can run equivalent analysis to standard cases in final product markets, with different set of labels. See figure below
5. Conduct/anti-poaching
Email of Steve Jobs (Apple) to Eric Schmidt (Google):"I would be very pleased if your recruiting department would stop doing this“ (referring to G's attempts to recruit one of A’s engineers)
Note: there may be no retail overlaps, and still harm to workers
Email of Steve Jobs (Apple) to Eric Schmidt (Google):"I would be very pleased if your recruiting department would stop doing this“ (referring to G's attempts to recruit one of A’s engineers)
Note: there may be no retail overlaps, and still harm to workers
6. So, why don’t we run these cases in Europe? I have not seen one in past 2 years since I am at @EU_Competition. Reasons:
a) Labour markets are typically local, so perhaps this not a EU job but of National Competition Authorities. Fair enough (as long as it is done by somebody)
a) Labour markets are typically local, so perhaps this not a EU job but of National Competition Authorities. Fair enough (as long as it is done by somebody)
b) Possibly rare for merging firms to be 2 of a few customers to which their suppliers can turn (an empirical question that still should be assessed)
c) IO (not labour) economist mindset is to see this as possible efficiency defence: final prices will go down. This is DANGEROUS!
c) IO (not labour) economist mindset is to see this as possible efficiency defence: final prices will go down. This is DANGEROUS!
d) Correct approach: distinguish between purchases of inputs in competitively structured input market (no power to suppress output by reducing wage) from monopsonistic price suppression (with output decrease)
Note: with monopsony, also OUTPUT reduced -> even final customers lose
Note: with monopsony, also OUTPUT reduced -> even final customers lose
e) Political mistake IMO of never talking to the unions, even in sectors that affect tens of thousands of jobs (e.g. steel mergers). Good competition policy should keep prices low and output up: need workers to produce this output. Political winner to do it right. /end
