Compromise Solution

What is likely to occur in the case of the monopoly union/monopsony employer confrontation? Typically, wage/employment bargaining produces a compromise wage/employment outcome. Compromise achieved through countervailing power has the beneficial effect of moving the labor market away from the inefficient unchecked monopoly or monopsony solutions toward a more efficient labor market equilibrium. However, only in the unlikely event of per fectly matched monopoly/monopsony protagonists will the perfectly competitive outcome occur. Depending on the relative power of the union and the employer, either an above-market or a below-market wage outcome typically results, and employment opportunities are often below competitive employment levels. Nevertheless, monopoly/monopsony confrontations can have the beneficial effect of improving economic efficiency from that experienced under either unchecked monopoly or monopsony.

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