Business /  Econ

Econ

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Autor:  anton  31 May 2011
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Words: 422   |   Pages: 2
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Identify the name of the person who originated the idea of "monopsony" and explain her idea?

Joan Robinson (1903-1983) developed the monopsony model. While others in the field of imperfect competition were focusing on the monopoly power of sellers, Robinson developed the model for a single buyer. She developed the graphical textbook model of how a single hirer of labor could pay a lower-than-competitive-wage and still attract the profit-maximizing quantity of labor.

As an economist, Robinson had an eclectic career. Not only did she address a wide variety of issues, her philosophical approach to economics changed dramatically. Robinson started her professional life as a neoclassical economist, studying under Alfred Marshall at Cambridge University. As her career progressed, she became a contributor to the more liberal Keynesian economics and ultimately to the somewhat radical post-Keynesian economics.

In addition to her theoretical contributions, Robinson actively engaged in the formation of public policy. In order to combat low wages and lack of bargaining power in monopsony markets, Robinson and her theories supported a number of laws friendly to labor. Three of particular significance was the Wagner Act (1935), which promoted the growth of labor unions; the Robinson-Patman Act (1936), which protected small sellers from the monopsony power of large buyers; and the Fair Labor Standards Act (1938), which established the minimum wage.

Identify the person who first modeled discrimination as a "taste" and the implications of this "taste" for economic efficiency and economic equity?

Gary Becker (b. 1930) developed the Taste for Discrimination model. The model came out of his 1955 doctoral dissertation, which was revised and published in 1957 under the title The Economics of Discrimination.

Taste for discrimination model is that competition will in the long run reduce discrimination. Suppose d = $2 then all firms can hire black workers for $8 including the nondiscriminators. (Remember all the workers are equally productive) Thus the nondiscriminators will hire blacks for less than whites and will therefore have lower costs per unit of output and lower average total costs than firms which discriminate. Remember firms which discriminate pay $8 plus if a $2 cost for discrimination. These lower costs for nondiscriminating firms will allow them to under price their competitors, which discriminate thus driving them out of business. Firms are driven out of business because those firms that discriminate are maximizing utility and not profits. Since utility also includes their prejudicial preferences instead of profits competing firms that do not discriminate maximize profits, which allow them to pay a lower wage.



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