Factor Demand Elasticity under Monopoly and Monopsony

Abstract

The object of this paper is to extend the theory of factor-demand elasticity to monopolistic and monopsonistic firms without imposing the restrictive assumption of linear homogeneity. The elasticity of factor demand is derived in both cases and the Marshall-Pigou-Hicks rules are tested. Since a unique monopsony factor demand function can be derived if, and only if, at least one factor price is parametrically given, we restrict our analysis to this case. Since, except for matrix elements, it is exactly the same as the monopoly situation, the monopsony case is treated summarily. [Авторский текст]