انحصار، بازده اقتصادی و بیکاری

The objective of this paper is to analyze the efficiency consequences of monopoly from the perspective of an efficiency-wage model of unemployment based on Shapiro and Stiglitz (1984). An important feature 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. Using this model we study how a monopolist's decision with regard to employment, output and monitoring is affected by exogenous variables such as job separation rate, technological advances, market size, and unemployment benefits. Furthermore, by comparing with the competitive equilibrium we find that monopoly is associated with higher unemployment rate, smaller output, and less monitoring. Surprisingly, however, monopoly does not necessarily lead to lower welfare level.

It is well-known that monopoly causes inefficient allocation of resources. As illustrated by the standard textbook model of monopoly, deadweight losses arise because a monopolist sets its price above the marginal cost of production. In addition, productive inefficiencies and rent seeking activities have also been cited as reasons for efficiency losses of monopoly. However, there is one area of potential efficiency losses of monopoly that so far has rarely been explored in microeconomic theory, that is, the effects of monopoly on unemployment. Since unemployment represents unutilized labor resource, it can be argued that an increase in unemployment rate, ceteris paribus, causes additional efficiency losses. Given that output is an increasing function of labor, reduction in output by a monopoly will normally cause a reduction in labor employed in the monopolized industry. To the extent that the surplus labor released by the monopolized industry is not entirely absorbed by other industries in the economy, more unemployment will result. Therefore, it seems plausible that monopoly may cause higher rate of unemployment. Indeed, it has been argued by some economists (see Layard et al., 2005 and Geroski et al., 1995 for examples) that competition in the product market reduces unemployment. However, while the issue of unemployment figures prominently in other fields of economics such as macro and labor economics, microeconomic analysis of monopoly is still confined to an equilibrium framework that, by its implicit assumption of a perfectly flexible labor market, is incapable of handling unemployment. The main objective of this paper is to analyze the efficiency and employment consequences of monopoly from the perspective of an efficiency wage model of unemployment based on Shapiro and Stiglitz (1984). In this model a monopolist has to offer a wage high enough to induce workers to expend efforts on the job. An important feature of our model is that a monopolist can raise the probability that a shirking worker is detected by increasing its effort or investment in the monitoring of workers.1 Using this model we study how the monopolist's decision with regard to employment, output and monitoring are affected by exogenous variables such as job separation rate, technological advances, market size, and unemployment benefits. Furthermore, we examine the efficiency consequences of monopoly by comparing the monopoly equilibrium with the competitive equilibrium. In this regard, the most important finding from our analysis is that while monopoly is associated with higher unemployment rate, smaller output, and less monitoring, it does not necessarily lead to lower welfare level. This result is surprising in light of the common belief about the welfare losses of monopoly. The rest of this paper is organized as follows. Section 2 presents the model and characterizes the monopoly equilibrium. In Section 3 we analyze how the monopoly equilibrium is affected by various parameters of the model, and in Section 4 we compare the monopoly equilibrium with the benchmark of a competitive equilibrium. In Section 5 we present the results from the simulations of our model with specific functional forms. Section 6 extends the one-firm model to an M-industry model. And conclusions of this paper are in Section 7.

In this paper we have analyzed the efficiency and employment consequences of monopoly in the presence of unemployment caused by efficiency wage considerations. We have shown that in addition to a smaller output and a higher price, monopoly also leads to higher unemployment rate than the competitive equilibrium. It is worth noting that the effects of monopoly on the wage rate and total welfare, however, are ambiguous. Numerical simulations of the model indicate that under certain range of parameter values, monopoly generates higher total surplus than perfect competition. Therefore, by introducing an additional distortion (i.e. unemployment) into the model, it is no longer the case that monopoly is always dominated by perfect competition in terms of economic efficiency. Another contribution of this paper is that we have constructed an efficiency-wage model that takes into consideration the demand condition that the firm faces and the firm's choice of monitoring. The introduction of these additional considerations has generated some interesting results. For example, we have found that the effects of a technology shock on unemployment and the firm's monitoring depend on the properties of the product demand function; a positive technology shock that raises the marginal product of labor may in fact reduce the level of employment if product demand is not sufficiently elastic.