Market power in a billateral monopoly model of industry wage determination

A variant of the Hicksian bilateral monopoly model is constucted. We show that market power can, in principle, affect the rate of change of money wages quite independently of unemployment, hence deserves a place in the derived wage equation, contrary to the postulate of the excess demand model. Our modified Hicksian model is submitted to a test and found to be consistent with the empirical evidence. Finally, some implications for the Phillips curve analysis are discussed.