%0 Journal Article
%T Exploitation in Monopsony
%A Chung-Cheng Lin
%J Theoretical Economics Letters
%P 494-502
%@ 2162-2086
%D 2015
%I Scientific Research Publishing
%R 10.4236/tel.2015.54058
%X A key feature of monopsony model is that a single firm pays its workers a
wage (<i><span style=\"font-family:Verdana;\">w</span></i><span style=\"font-family:Verdana;\">) less than the marginal revenue
product (</span><i><span style=\"font-family:Verdana;\">MRP</span></i><span style=\"font-family:Verdana;\">). This feature has been
explained as a synonym of the single firm exploiting its workers since its
creation by Joan Robinson</span><span style=\"font-family:Verdana;\"> [1]</span><span style=\"font-family:Verdana;\">. By using a simple standard efficiency wage
model of Yellen</span><span style=\"font-family:Verdana;\"> [2]</span><span style=\"font-family:Verdana;\">, this paper examines the conventional wisdom by showing that
the firm pays workers </span><i><span style=\"font-family:Verdana;\">w<mrp< span=\"\"></mrp<></span></i><span style=\"font-family:Verdana;\"> in the equilibrium of
full employment, but paradoxically pays them </span><i><span style=\"font-family:Verdana;\">w=MRP</span></i><span style=\"font-family:Verdana;\"> in the equilibrium of
involuntary unemployment. According to the conventional wisdom that the result
of </span><i><span style=\"font-family:Verdana;\">w<mrp< span=\"\"></mrp<></span></i><span><span style=\"font-family:Verdana;\"> implies that workers are exploited by the
firm, this f</span><span style=\"font-family:Verdana;\">inding indicates that the firm does not exploit its employees (</span></span><i><span style=\"font-family:Verdana;\">w=MRP</span></i><span style=\"font-family:Verdana;\">) when there are involuntary unemployed workers queuing for jobs, but
paradoxically exploits workers (</span><i><span style=\"font-family:Verdana;\">w<mrp< span=\"\"></mrp<></span></i><span style=\"font-family:Verdana;\">) when there are no
workers queuing for jobs. The finding is obviously counter-intuitive. This counter-intuitive
finding reveals that the key feature of </span><i><span style=\"font-family:Verdana;\">w<mrp< span=\"\"></mrp<></span></i><span style=\"font-family:Verdana;\"> in monopsony cannot be
regarded as a proper theoretical basis for the issue of labor exploitation.</span>
%K Monopsony
%K Exploitation
%K Efficiency Wages
%U http://www.scirp.org/journal/PaperInformation.aspx?PaperID=58576