The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd


  • Alan Manning
Reference work entry


Monopsony refers to the situation where a firm has some market power over the price it pays for its inputs, so that a higher price must be paid the more input is used. Monopsony could exist in any input market but is usually discussed in the context of the labour market. Employers will have monopsony power over their workers because of frictions in the labour market. Employers will use this monopsony power to pay workers less than their marginal product. This gap between marginal product and wage offers policy an opportunity to raise the wage of workers without necessarily jeopardizing their employment.


Collusion Frictions Human capital Job mobility Labour markets Labour supply Law of one wage Minimum wage Monopsony Oligopsony Partial equilibrium Robinson, J. Search capital Search models Smith, A. Training Wage discrimination Wage dispersion Wage heterogeneity, sources of 

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Authors and Affiliations

  • Alan Manning
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