Price Takers' Plenty in a Model of Pure Capitalism.

Scitovsky, Tibor

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Document type:: Collected items

Collection:: Josef Steindl Collection

Title:: Price Takers' Plenty in a Model of Pure Capitalism.

Author:: Scitovsky, Tibor

Scope:: Kopie eines Typoskripts, 27 Blätter, mit handschriftlicher Korrektur und Korrektur mit Korrekturfolie, Paginierung von 5.1-5.20 und von 3.21-3.26

Year of publication:: 1983

Source material date:: [November 1983]

Language:: English

Note:: Draft.

Related work:: Scitovsky, Tibor: Pricetakers' Plenty: A Neglected Benefit of Capitalism. In: Kyklos, Dec 1985, Vol. 38 Issue 4, S. 517-516

JEL Classification:: D41 [Market Structure, Pricing, and Design: Perfect Competition]

Shelfmark:: S/M.33.7

Access:: Free access

evident and be acted upon. Strong unions and a highly competitive labor market reduce the individual employer's position in the labor market to that of a price taker and quantity adjuster, whose profits, in the long run, are maximized when he employs the amount of labor that equates its MVP to the wage. In the short run, however, the employer is able, through appropriate quantity adjustments, to influence the wage he pays his workers. That makes him a temporary monopsonist, who, finding that the MVP of his workers exceeds their MC, can earn a temporary monopsony profit by employing additional workers. Note that that situation is the exact opposite of the price- maker employer's situation, who acts as a. monopsonist in setting his wage but -feggil^iooks upon the wage he set as fixed) in the short runjand proceeds to make all his other adjustments and decisions as if he were a perfect competitor and faced a wage given from the outside. What remains to be shown is that those two employers, despite their diametrically opposite market positions, behave in very similar, almost identical ways. The paradox is due to the peculiar, upside-down situation that the payment of revenue-sharing bonuses to workers created for their employer. His short-run monopsony power derives fi*on the fact that the price of his labor is a function of the amount of employment he offers; but it is a declining function of employment

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