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Monopsony, Price Squeezing, and Sub-optimality
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- Authors
- Issue Date
- 2023-06
- Citation
- Seoul Journal of Economics Vol.36 no.2, pp.221-232
- Keywords
- Monopsony ; Price Squeezing ; Sub-opt imal ; Investments ; Vertical Over-integration
- Abstract
- Monopsony has been a hot issue recently. A traditional view is
that monopsony is harmless to consumers unless it results in higher
prices downstream. In this study, I present a theoretical model in
which the monopsonist may engage in price squeezing but cannot
commit not to engage in advance. This lack of commitment (holdup
problem) leads to two types of sub-optimality: (i) the monopsony
reduces intermediate-good producers incentive for relationshipspecific
investments, leading to sub-optimal investments and
lowered wages, and (ii) the monopsonist may choose vertical overintegration
- ISSN
- 1225-0279
- Language
- English
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