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Markets and Oligopsony and Monopsonistic Competition


            ´╗┐Generally, oligopsony and monopsonistic competition are market power that focused on the sellers which is the mirror image of oligopoly. There will be deadweight loses because of the presence of market power which distorts the outcome. Oligopsony is a market where there are a few employers who have a large control on the going wage and use the market power to change the end results whereas monopsonistic competition occurs when there is free entry and exit in oligopsony market.(Mankiw, 2011) When the elasticity of the market supply is small, there will be a large difference between average expenditure and marginal expenditure which leads to higher monopsony power. However in oligopsony, buyers can choose to collude or compete among themselves therefore there will be a kinked supply curve. .
             Figure 1: Kinked supply curve in oligopsony (anemecon, 2012).
             Unlike the perfect competitive labor market, oligopsony or monopsonistic competition's labor supply curve is not perfectly elastic which means employees will not leave immediately when there is a wage cut. The absence of infinite labor supply curve is because there is no perfect information for other jobs and every workers have heterogeneous preference over non-wage job characteristics. The firm-sponsored trainings and minimum wage effects in oligopsony and monopsonistic competition are quite different compared to perfectly competitive market. .
             Figure 1: Monopsony or monopsonistic competition graph (Wikipedia, 2014).
             The standard theory of human capital said that firms do not invest on general training because there might be ex post wage competition between current firm and potential employers.(Acemoglu and Pischke,1999) Human capital can be in the form of schooling, on the job training or maybe specialized courses which are quite popular these days as the improvement in technologies need a constant learning. General trainings are skills that can be used in most of the industry while specific training can increase productivity only in the current job.


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