Share This Article:

Monopoly and Economic Efficiency: Perspective from an Efficiency Wage Model

Abstract Full-Text HTML Download Download as PDF (Size:249KB) PP. 830-833
DOI: 10.4236/me.2011.25092    8,680 Downloads   12,336 Views  
Author(s)    Leave a comment

ABSTRACT

The objective of this paper is to analyze the efficiency consequences of monopoly from the perspective of an efficiency-wage model based on Shapiro and Stiglitz (1984). An important innovation of our model is that a firm can raise the probability that a shirking worker is detected by increasing its effort or investment in the monitoring of workers. By comparing with the competitive equilibrium we find that monopoly is associated with higher unemployment rate and less monitoring. Surprisingly, however, monopoly is not necessarily dominated by perfect competition in terms of economic efficiency.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

B. Zhao, "Monopoly and Economic Efficiency: Perspective from an Efficiency Wage Model," Modern Economy, Vol. 2 No. 5, 2011, pp. 830-833. doi: 10.4236/me.2011.25092.

References

[1] C. Shapiro and J. Stiglitz, “Equilibrium Unemployment as a Worker Discipline Device,” American Economic Review, Vol. 74, No.3, 1984, pp. 433-444.

  
comments powered by Disqus

Copyright © 2018 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.