In the figure, WM represents the wage rate
the monopsony employer would set, while WU
represents the wage rate the trade union wishes
to impose. The disparity between these two
wage levels creates a conflict of interest
between the employer and the trade union.
This would eventually lead to the collective
bargaining process where a final wage rate
would be established somewhere between WM
and WU . If the employer has relatively greater
market power than the union, then the final
wage rate would be closer to WM whereas if
the trade union is relatively more powerful,
then the negotiated wage would settle closer
to WU.
