Asymmetric market power and wage suppression

Research output: Contribution to journalArticlepeer-review

Abstract

We study a labor market in which two identical firms compete over a pool of homogeneous workers. Firms pre-commit to their outreach to potential employees, either through their informative advertising choices, or through their screening processes, before engaging in a wage (Bertrand) competition. Although firms are homogeneous, the unique pure-strategy equilibrium is asymmetric: one firm maximizes its outreach whereas the other compromises on a significantly smaller market share. The features of the asymmetric equilibrium extend to a general oligopsony with any finite number of firms.

Original languageAmerican English
Pages (from-to)38-59
Number of pages22
JournalScandinavian Journal of Economics
Volume126
Issue number1
DOIs
StatePublished - 1 Jan 2024

Keywords

  • Asymmetric market power
  • oligopsony
  • outreach
  • tacit collusion

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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