The Implications of Monopsony for Regional Technological Change
Much of the economic literature, including that dealing with technological change, implicitly assumes competitive markets. To the extent that the literature introduces market imperfections, it focuses on the product market, largely ignoring factor markets. For example, Scherer (1980) devotes less than two per cent of his study of market structure to the analysis of monopsony. With respect to the impact of product market imperfections on technological change, the academic community is divided. The followers of Schumpeter argue that the scale advantages of oligopoly are required to support research and to reap its benefits before competitors have a chance to imitate innovations. Others argue that oligopoly power reduces the incentive to innovate because the excess profits generated by market power reduce the incentive for efficiency. This paper considers the impact of monopsony on the incentive to adopt technological change, focusing on process rather than product innovation.
KeywordsMarginal Cost Technological Change Factor Price Supply Curve Average Total Cost
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