The main aim of this paper is to suggest a model which relates wage rates to the degree monopsony power in the labour market. Labour market monopsony power has received relatively little theoretical or empirical attention, yet there are a number of reasons for believing it may be a fairly general phenomenon. Firstly, imperfect worker information on the existence and characteristics of alternative jobs will tend to impart a positive slope to the supply curve of labour facing a firm. Secondly, there are many social and institutional barriers to geographical mobility. Finally, the literature on segmented labour markets emphasises the barriers to mobility between jobs even within a region.
