Wage-Rise Contract and Mixed Duopoly with Price Competition

This paper investigates a mixed duopoly environment in which a private firm competes on price with a public firm. The following timing of actions is considered. In the first stage, each firm non-cooperatively decides whether to adopt a wage-rise contract as a strategic commitment device. If a firm a...

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Bibliographic Details
Published in:International Journal of Management, Accounting & Economics Accounting & Economics, 2017-09, Vol.4 (9), p.898-908
Main Author: Kazuhiro Ohnishi
Format: Article
Language:English
Subjects:
mixed market model
price competition
private firm
public firm
strategic commitment
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Summary:This paper investigates a mixed duopoly environment in which a private firm competes on price with a public firm. The following timing of actions is considered. In the first stage, each firm non-cooperatively decides whether to adopt a wage-rise contract as a strategic commitment device. If a firm adopts a wage-rise contract, then it chooses an output level and a wage premium rate, and agrees to pay each employee a wage premium uniformly if it actually produces more than the output level. This irreversible behaviour causes changes to the price-competing market environment of the second stage. The paper presents the equilibrium solution of the mixed duopoly model.
ISSN:2383-2126