Bilateral Monopoly Suppose a union has negotiated a closed-shop arrangement (in a country where such arrangements are legal) with an employer that possesses monopsony power in its labor market The union has a kind of monopoly in the supply of labor A situation in which a monopsony buyer faces a monopoly seller is called bilateral monopoly Wages in this model are indeterminate, with the actual wage falling somewhere between the pure monopoly and pure monopsony outcomes Figure 14.12Bilateral Monopoly If the union has monopoly power over the supply of labor and faces a monopsony purchaser of the labor the union represents, the wage negotiated between the two will be indeterminate The employer will hire Lmunits of the labor per period The employer wants a wage Wm on the supply curve S The union will seek a wage close to the maximum the employer would be willing to pay for this quantity, Wu, at the intersection of the marginal revenue product (MRP) and the marginal factor cost (MFC) curves The actual wage will be somewhere between these two amounts Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 766