Mergers that involve issues of monopsony are addressed in this chapter. In some cases, a merger may be procompetitive or competitively neutral. In others, however, a merger may be anticompetitive and, therefore, should be barred. Horizontal mergers combine two (or more) firms that operate in the same output market. Since they employ similar workers, the merger may create monopsony power. Antitrust policy regarding horizontal mergers is provided by §7 of the Clayton Act and its judicial interpretation. Typically, the focus is on concentration in the output market, but there has been some recent recognition that a merger may have ill effects in the labor market. We examine this recent concern and provide some examples.

Here, we focus on non-compete agreements (NCAs). NCAs severely limit job mobility and reduce a worker’s opportunities to exploit their human capital. Most NCAs preclude a worker’s ability to obtain a position with a rival employer for six months to two years after separation. In addition, the former employee may not start their own business in the same industry. The economic result of these restrictions is to reduce the labor supply elasticity, which enhances an employer’s ability to depress employee compensation, other benefits, and working conditions.

Employers argue that they need NCAs for two primary reasons. First, upon separation, an employee could take the former employer’s trade secrets to a rival employer. An NCA may solve this problem because many trade secrets, such as short-run production plans, are short-lived. Second, employers often invest in an employee’s human capital with schooling or training. An NCA provides protection for such investments in human capital.

In this chapter, we examine the pros and cons of NCAs. We also examine the Federal Trade Commission’s proposal to ban all NCAs completely.

We begin with the basic economic theory of monopsony. In this chapter, we present the economic models of (1) pure monopsony, (2) the dominant employer, and (3) oligopsony. In these cases, we show that profit maximization results in ill effects for workers. These include reduced compensation, reduced employment, and the redistribution of wealth from workers to employers. We also show that social welfare is reduced below the level that society would have experienced in the absence of monopsony.

In our final chapter, we summarize the antitrust law and economics of monopsony in the labor market. We provide some policy recommendations that are consistent with economic principles and empirical reality.

Monopsony is the label that Joan Robinson attached to a market in which a single employer faces a competitively structured supply of labor. For some reason, her early theoretical analysis, along with the insights of A. C. Piguo and J. R. Hicks, did not gain much traction. Recently, however, economists and policymakers have recognized the ill effects of monopsony and have offered some actions aimed at mitigating – if not eliminating – the monopsony problem. In our view, vigorous enforcement – both public and private – of the antitrust laws can play a large role in reducing the ill effects of monopsony power in the labor market.

Monopsony is the inelegant term that refers to a market in which there is a single buyer (or employer) of a well-specified good or service. Provided that the supply of inputs is positively sloped, the monopsonist may have market power. Profit maximization will lead the monopsonist to depress the price of the input by reducing its purchases, which harms input suppliers and also consumers. Although it is somewhat counterintuitive, this apparent cost saving does not result in lower output prices. In this chapter, we will show how the exercise of monopsony power has deleterious economic effects in both the input market and the output market. We also extend our discussion to dominant buyers and oligopsonists. We observe monopsony in many health insurance markets. Dominant health insurers generally represent a large share of business for health care providers. This allows an insurer to depress reimbursement rates for health care providers by adjusting the quantity of the services that it buys. Those lower reimbursement rates may lead to a reduction in the availability and quality of care for patients.

In this final chapter, we emphasize the importance of competition in health care markets. The antitrust laws can be used to promote competition and thereby save consumers, health insurers, and the government billions of dollars. Although many policymakers call for a complete replacement of the US health care system, we offer remedies that can be implemented immediately.

In Economics 101, we learn that competition and competitive markets provide the biggest bang for the buck. Market imperfections, however, impair the competitive process and introduce inefficiencies that, in time, reduce the well-being of society. In this chapter, we discuss how the antitrust laws can be used to promote competition in the US health care sector, which could save consumers, health insurers, and the government billions of dollars. We provide a road map of the issues that we will discuss in later chapters.

Hospitals use group purchasing organizations (GPOs) to purchase medical supplies, devices, and other inputs rather than purchasing directly from a manufacturer. GPOs consolidate the purchasing power of their members and negotiate contracts with input suppliers on their behalf. But this has raised several public policy concerns. First, in order to be successful in reducing input prices, a GPO must represent a sufficient volume of purchases and therefore has some measure of monopsony power, which tends to reduce social welfare. Second, GPOs employ a variety of contractual provisions that may limit the sources of supply to their members, which raises antitrust concerns about the exclusion of equally efficient competitors. Third, the GPO’s funding mechanism may provide a perverse incentive such that GPOs may not secure the best price for hospitals when it is profitable to do so. This chapter provides an economic analysis of the competitive consequences of GPOs and addresses the economic effects of the GPO funding mechanism.

The United States has faced a significant and persistent nurse shortage. Usually, a shortage is remedied with increased prices (or wages), which would increase the number of nurses. But hospital administrators appear to be unwilling to raise salaries for nurses. Unfortunately, this means that patients may not receive the quality of care that a fully staffed hospital could provide. The exercise of monopsony power may be one explanation for the persistent shortage. Employers of nurses often have substantial monopsony power, which allows them to increase their profits by reducing the quantity of nurses they hire. Having and exercising monopsony power, however, is not per se illegal. In this chapter, we focus on a possible alternative explanation for the nursing shortage: collusive monopsony in the nurse labor market, behavior that is per se illegal. It occurs when firms conspire with one another to depress wages. Recent antitrust litigation in several states has indicated that there may be pervasive collusion and information sharing among hospitals aimed at depressing the salaries of nurses.

In recent years, the exercise of monopsony power has become more prevalent in labor markets, particularly through anticompetitive agreements among firms. No-poaching agreements are agreements among rival employers to refrain from hiring another firm’s employees. No-poaching agreements deprive employees of the competitive benefits that result from outside employer interest. Recent litigation in a variety of industries highlights the competitive concerns with no-poaching agreements. In this chapter, we explore the role of monopsony and buying power in no-poaching agreements and specifically review a no-poaching case involving the deans of two medical schools in North Carolina.

This chapter provides an overview of the antitrust laws. We begin with some historical background and move on to explore the economic rationale for having a public policy that protects and promotes competition. The pertinent sections of the Sherman Act, the Clayton Act, and the Federal Trade Commission Act are presented, and their coverage is explained briefly. The importance of both public and private enforcement efforts is discussed.

The market in ancient Greece should be understood as a specific institutional construct, that of the city-state, which allowed its citizens to exercise private property rights guaranteed by law. By extension, free foreigners were also acknowledged these rights, which however extended to the private ownership of human beings (slavery). The city-state also created the conditions for an unusually high division of labour. Each city was a market space of its own, with its own rules and logic, which could include the control over sales margins and even sometimes the establishment of maximum prices for some perishable fresh goods. The network of hundreds of Greek city-states also created the conditions for the development of an original form of international market.

The importance of labor market dynamics to the study of American political development has never been in question. The labor market is, at one and the same time, a point of distribution of economic production, an arena for political interest articulation, and – perhaps most interesting – an allocation of private political power. Of course, there are other markets with these properties (in particular housing and credit), but labor income still predominates the budgets of most of the population, time at work dominates the activity of most working-age adults, and political emotions such as status and dignity clearly owe a great deal to the distribution of power and autonomy at the gates of and inside the “hidden abode of production”

Of the states examined in this research, Zimbabwe has the most in-country variation in response to the Kimberley Process. Since a large diamond find in the Marange diamond fields in 2006, Zimbabwe has had five different regulatory strategies in response to the Kimberley Process that are defined in this study. Furthermore, Zimbabwe became a controversial and pivotal case for the Kimberley Process when the government took over the diamond fields in 2008. This led NGOs and other governments to accuse the Zimbabwean state of human rights abuses and complain that the Kimberley Process was too weak to act forcefully in this case. However, while the Zimbabwean state has ignored many other international agreements there has always been at least some effort to stay within the Kimberley Process, thus leading to interesting levels of variation in the government’s strategy toward the process over time. This research argues that variation in regulatory policy in the diamond sector is due to the political economy of factional rivalries within ZANU-PF that have long dominated Zimbabwean politics. In this context the Kimberley Process was heavily politicized and used as an instrument to gain market share.