monopoly union model

(noun)

This model states that the monopoly union has the power to maximize the wage rate; the firm then chooses the level of employment.

Related Terms

Examples of monopoly union model in the following topics:

  • A Brief Definition

    • Different economic theories provide a number of models intended to explain some aspects of collective bargaining:
    • The so-called monopoly union model (Dunlop, 1944) states that the monopoly union has the power to maximize the wage rate; the firm then chooses the level of employment.
    • The right-to-manage model, developed by the British school during the 1980s (Nickell), views the labor union and the firm bargaining over the wage rate according to a typical Nash Bargaining Maximin.
    • The efficient bargaining model (McDonald and Solow, 1981) sees the union and the firm bargaining over both wages and employment (or, more realistically, hours of work).
    • Define the monopoly union model, the right-to-manage model, and the efficient bargaining model as theories of collective bargaining

  • Industrial Conflict

    • An example of a labor union is the American Federation of Labor and Congress of Industrial Organization (AFL-CIO), whose constituent unions represent most American workers.
    • In the old model of the AFL,all carpenters belong to the carpenters' union, the plasterers join the plasterers' union, and the painters belong to the painters' union.
    • Each craft union has its own administration, its own policies, its own collective bargaining agreements, and its own union halls.
    • In 1974, Harry Braverman wrote Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century, which provided a critical analysis of scientific management.
    • Summarize the main points of industrial sociology and Labor Process Theory, including the development of labor unions and types of unionism

  • Regulation of Natural Monopoly

    • Natural monopolies are conducive to industries where the largest supplier derives cost advantages and must be regulated to minimize risks.
    • As a result, monopolies are generally viewed as illegal entities.
    • Rate of return regulations: This is quite similar to average cost pricing, but deviates via allowing a model that can create consistent returns for the company involved.
    • While the concept of a monopoly is generally perceived as a threat to free markets, there are specific circumstances where natural monopolies are either pragmatically useful (cost effective) or virtually unavoidable.
    • While monopolies are generally poor economic constructs for creating value, natural monopolies are predicated on the fact that a single supplier can achieve the greatest economies of scale (cost advantages).

  • Antitrust Laws

    • There are a wide range of real-life examples of monopolies, though few more famous than Microsoft.
    • The regulation of competitive markets has roots as far back as the Roman Empire, resulting in increasingly complex models as capitalism has evolved over time.
    • European Union (EU) - In the EU, competition law began in 1951 with the European Coal and Steel Community (ECSC), which included France, Italy, Belgium and the Netherlands.
    • The purpose of this was to reduce the ability for one country/region to gain a monopoly on critical natural resources.
    • Discuss antitrust laws aimed to improve competition and prevent monopolies from becoming more powerful

  • Resource Control

    • A classic example of a monopoly based on resource control is De Beers .
    • It convinced independent producers to join its single channel monopoly.
    • The De Beers model changed at the turn of the 21st century, when diamond producers from Russia, Canada, and Australia started to distribute diamonds outside of the De Beers channel.
    • In practice, monopolies rarely arise because of control over natural resources.
    • For most of the 20th century, De Beers had monopoly power over the world market for diamonds.

  • Social Impacts of Monopoly

    • A monopoly can diminish consumer choice, reduce incentives to innovate, and control supply to enforce inequitable prices in a society.
    • As such, the perfect competition model is most useful in identifying and measuring deviations or departures from the competitive ideal.
    • The farther an industry or market moves from a perfectly competitive model the more value is potentially migrating from the consumers to the suppliers.
    • As a result, a monopoly causes deadweight loss, an inefficient economic outcome.
    • Outline the effect of a monopoly on producer, consumer, and total surplus

  • Labor Unions

    • The SEIU, or service employees international union, is the fastest growing union in North America.
    • Other forms of unionism include minority unionism, solidarity unionism, and the practices of organizations such as the Industrial Workers of the World, which do not always follow traditional organizational models.
    • Union membership had been declining in the US since 1954.
    • Most of the recent gains in union membership have been in the service sector while the number of unionized employees in the manufacturing sector has declined.
    • Although most industrialized countries have seen a drop in unionization rates, the drop in union density (the unionized proportion of the working population) has been more significant in the United States than elsewhere.

  • Impact of Unions on Unemployment

    • For example, in a unionized industry, rather than each employee negotiating his or her own vacation time with the employer, a union will negotiate with the firm in order to create a contract governing vacation time that applies to every union member.
    • Unions are able to raise wages because, when they are powerful, they may turn the labor market into a monopoly market.
    • Like any monopoly market, the outcome will be an equilibrium with higher prices and lower supply than in the competitive equilibrium.
    • Critics also argue that if some industries are unionized and others are not, wages will decline in non-unionized industries.
    • The above arguments focus on how unions affect unemployment by negotiating for higher wages, but unions may also affect unemployment in other ways.

  • Duopoly Example

    • The Cournot model, in which firms compete on output, and the Bertrand model, in which firms compete on price, describe duopoly dynamics.
    • The model makes the following assumptions:
    • If Firm B sets the price above monopoly price, Firm A will set the price at monopoly level.
    • When Firm 2 prices above MC but below monopoly prices, Firm 1 prices just below Firm 2.
    • When Firm 2 prices above monopoly price (PM), Firm 1 prices at monopoly level (P1=PM).

  • Labor Interest Groups

    • The National Labor Union (NLU) was the first American federation of unions formed in 1866.
    • The CIO was built around an industrial unionism model.
    • These two major unions merged in 1955 to form the AFL-CIO.
    • The Pullman's union and the United Farm Workers unions are examples of unions that came together to advocate for the economic interests of African-American and latino workers.
    • While private union membership has declined, public unions are still quite strong.