Profit-sharing in a unionized cournot duopoly

The main purpose of this paper is to analyze when it is optimal for firms in a unionized duopoly to introduce profit-sharing. It is shown that a firm only prefers a profit-sharing system if its own union does not have “too much” bargaining power, and if the union in the other firm does not have “too much” bargaining power. However, if a firm introduces profit-sharing, the employment increases, and the price in the goods market decreases. Hence, even if it is not in the own interest of a firm to introduce profit-sharing, it may be in the interest of the society.     

Profit sharing and strike activity in Cournot oligopoly

Within an incomplete-information framework, we develop a model of wage determination in a unionized Cournot oligopoly. The assumption of incomplete information allows the possibility of strikes or lockouts, which waste industry potential resources, at equilibrium. Facing such deadweight loss, the government or the social planner may decide to adopt a policy, such as a profit-sharing scheme. Under two different bargaining structures (firm level vs. industry level), we investigate the effects of adopting profit sharing on the wage outcome and the strike activity. If the base-wage bargaining takes place at the industry level, then the introduction of a profit-sharing scheme increases the strike activity. But if the base-wage bargaining takes place at the firm level and the number of firms in the industry is greater than two, then the introduction of a profit-sharing scheme reduces the strike activity.     

Employment - restraining agreements in Weitzman's share system

Weitzman (1983) argues that a profit-sharing system would automatically maintain full employment in the face of deflationary shocks. This note shows that such a virtuous disequilibrium behavior could be thwarted by the spread of employer-employee agreements, by which the firm is compensated to temporarily refrain from hiring the unemployed.     

Modifying the RPI-X Regulatory System to Include Profit-sharing

This paper aims to contribute to the economic theory of RPI-X (price-cap) regulatory systems which include profit-sharing between a company and its customers. The particular focus is on whether profit-sharing can be introduced in an investment-neutral manner, and on whether there is scope to choose a profit-sharing system which maximises the expected customer rebate. Using a model of a company choosing optimal capacity in the face of uncertain demand and subject to price-cap regulation, it is shown that the potential exists for profit-sharing to be investment-neutral, and it is suggested that the expected customer rebate is maximised for an investment-neutral system which is effectively a cap on profits at a specified level.     

Employee treatment and corporate fraud

This paper examines the association between a firm’s relations with its employees and its likelihood of committing fraud. We find that firms treating their employees fairly (as measured by employee treatment index) have a lower likelihood of committing fraud since labor-friendly firms have incentives to signal their willingness to fulfill implicit contracts and maintain long-term relationships with employees. Further analysis shows that employee involvement and cash profit-sharing are the most important components in employee treatment to determine our results. Moreover, we show that the negative association between employee treatment and fraud propensity is more prominent when a firm is in a high-tech industry, when a firm in a less competitive industry, and when employees have less outside employment opportunities. Finally, we show that our results are not driven by the employee’s moral sensitivity or other labor related factors (i.e. labor wage, pension benefits, and labor union power).     

Employee relations and innovation: an empirical analysis using patent data

This paper investigates the relationship between employee relations (ER) as tracked in the environment, social, and governance (ESG) database provided by MSCI Inc., and innovation as measured by patents and patent citations. Some ER policies, such as broadly based profit-sharing plans, stock option plans, and stock ownership, create a direct link between a firm’s performance and employee compensation and might therefore be expected to encourage successful innovation. In addition, some other aspects of ER, including good pension plans, good union relations, and a variety of specific benefits (such as flex time) might improve innovation performance through their effect on employee morale or institutional loyalty, or simply by creating incentives to stay with the firm. We find that both of these categories of ER – financial incentives and non-pecuniary motivations – have a positive effect on innovation as measured by patenting and patent citations.     

Performance Pay,Productivity and Morale*

This paper incorporates the notion of worker morale into an economic model of pay and performance, and examines its implications for the efficacy and design of performance-based pay schemes. A worker's morale is determined by his relative pay status. A contract that rewards only individual performance can therefore undermine the morale of the least skilled workers in a firm and thereby adversely affect their productivity. On the other hand, competition for relative pay status tends to boost the productivity of highly skilled workers in the firm. The net effect on productivity depends on the composition of the firm's workforce. If the workforce is sufficiently heterogeneous then the inclusion of a profit-sharing component in the pay contract, which reduces the pay differential across workers, can sufficiently boost the morale of the least skilled workers as to improve overall productivity and profitability.     

Access profit-sharing regulation with information acquisition and transmission

This paper analyses how information acquisition and transmission on the upstream cost affect the optimal access profit-sharing plan and the regulator’s choice of an information transmission regime in network industries characterized by a regulated upstream monopoly with cost uncertainty and an unregulated downstream duopoly. When the regulator obliges the upstream monopolist to transmit information to a downstream rival, the adoption of an access profit-sharing plan may boost his/her incentives to acquire information. It will be shown that the optimal access profit-sharing plan under information transmission depends on the variance and shape of cost distribution. Moreover, an information transmission regime proves to be welfare preferable to a regime with no information transmission only if it induces information acquisition and if the regulator is significantly concerned about firms’ profits.     

Commitment and discretion in contracts: theory and evidence from retirement plans*

We consider a firm's problem of incentivizing its workforce through relational contracts, when workers effectively face a shorter time horizon due to possible separation shocks. Commitment issues then generate a trade-off between efficiency and distribution, which affects both performance and profits. Profits under relational contracting can exceed those under formal contracting, despite lower performance, when discounting is moderate, firm bargaining power is weak, and shocks are likely. Using a matched employer–retirement plan dataset, and interpreting discretionary profit-sharing plans and employee stock ownership plans as relational and formal contracting, respectively, we find some support for our predictions.     

Profit-Sharing and International Capital Mobility in Developing Countries

This paper uses a general equilibrium model incorporating rural–urban migration to analyze and contrast the short- and long-run effects of profit-sharing. Specifically examined are the effects of profit-sharing on rural–urban migration, the degree of competition among urban firms, and international mobility of capital. It is found that although profit-sharing may raise urban employment in the short run, the scheme reduces urban employment and lowers the inflow of foreign capital in the long run.     

Employee Profit-sharing and Labor Extraction in a Classical Model of Distribution and Growth

This article sets out a classical model of economic growth in which the distribution of income features the possibility of profit-sharing with workers, as firms choose periodically between two labor-extraction compensation strategies. Workers are homogeneous with regard to labor power, and firms choose to compensate them with either only a conventional wage or a share of profits on top of this conventional wage. Empirical evidence shows that labor productivity (i.e. labor extraction) in profit-sharing firms is higher than labor productivity in non-sharing firms. The frequency distribution of labor-extraction employee compensation strategies and labor productivity across firms is time-variant, being driven by satisficing imitation dynamics from which we derive two significant results. First, heterogeneity in labor-extraction compensation strategies across firms, and hence earnings inequality across workers can be a stable long-run equilibrium outcome. Second, although convergence to a long-run equilibrium may occur with either a falling or increasing proportion of profit-sharing firms, the share of net profits in income and the rates of net profit, capital accumulation and economic growth nevertheless all converge to the highest possible long-run equilibrium values.     

Rent extraction and incentives for efficiency in recent regulatory proposals

Building on a simple model proposed by Schmalensee (1989), this paper uses simulation techniques to analyze and compare various regulatory schemes including Schmalensee's family of (linear) good regulatory regimes, a price-cap regime allowing for downward price flexibility, and a regime that combines price-cap and profit sharing. The quantitative analysis pays particular attention to measuring the trade-off between rent extraction and incentives for efficiency. The main findings of this study can be summarized as follows. First, it appears that pure price-cap regulation leaves substantial rent to the firm relative to the other regimes. Second, introducing room for downward price flexibility improves efficiency of price-cap over Schmalensee's linear regulatory regimes. Finally, by correcting in part for the distributional distortion of price-cap, the profit-sharing mechanism often yields levels of welfare comparable to optimal regulation levels.     

Realitic and Analytic Syntheses of Macro- and Microeconomics

We study the impact of employer's opportunism on wage rigidity in capitalist companies by arguing that the need to fix wages is crucially influenced by the asymmetric distribution of decision-making power and information in favor of the stronger contractual party — the employer, and against the weaker contractual party — employees. The capitalist entrepreneur can make decisions, whose negative consequences are borne by workers in terms of lower wages and more intense work pace. Excessive wage reductions in the face of negative exogenous shocks or too risky investment decisions represent the main instances of such opportunistic behavior. Fixed wages can represent workers' best response to the emerging risk of the employer moral hazard, but this implies a heightened risk of layoffs since wages and employment levels cannot be fixed at the same time. Besides discussing piece rate contracts, profit-sharing and codetermination as counterexamples, we observe worker cooperatives which depart from the presence of contrasting interests and private information in the principal-agent framework. Indeed, several empirical studies have shown greater employment stability and wage flexibility in worker cooperatives vis-à-vis the capitalist firm.     

The equivalence of profit-sharing licensing and per-unit royalty licensing

In a duopoly with symmetric product differentiations, we prove that profit-sharing licensing and per-unit royalty licensing are equivalent to each other regarding both the profitability and the welfare influences.     

基于技术风险的并行研发联盟成员投资策略研究

本文通过构建并行研发联盟的合作研发博弈模型,分析技术风险和不同利润分配方式对联盟成员投资策略的影响,并研究了如何通过选择合理的利润分配方式来降低联盟成员的道德风险,激励其增大研发投入,从而促进合作研发的成功。研究表明:联盟成员在按投入比例分配方式下的期望投入高于在平均分配方式下的期望投入,并行研发联盟应尽可能按投入比例分配收益;市场收益率较高时,联盟成员的研发投入随着技术风险的增大而增大,因此并行研发联盟结构适合于高风险、高收益行业的新产品研发。     

Effects of blocking patents on R&D: a quantitative DGE analysis

What are the effects of blocking patents on R&;D and consumption? This paper develops a quality-ladder growth model with overlapping intellectual property rights and capital accumulation to quantitatively evaluate the effects of blocking patents. The analysis focuses on two policy variables (a) patent breadth that determines the amount of profits created by an invention and (b) the profit-sharing rule that determines the distribution of profits between current and former inventors along the quality ladder. The model is calibrated to aggregate data of the US economy. Under parameter values that match key features of the US economy and show equilibrium R&;D underinvestment, I find that optimizing the profit-sharing rule of blocking patents would lead to a significant increase in R&;D, consumption and welfare. Also, the paper derives and quantifies a dynamic distortionary effect of patent policy on capital accumulation.     

中西分享经济理论对比

我国学者李炳炎提出的社会主义分享经济理论与美国学者威茨曼教授提出的西方分享经济理论,是中西分享经济理论的代表性观点.李炳炎认为,在社会主义制度中,可以建立国家、集体和个人共同分享改革成果的机制.威茨曼则以解决滞胀问题为直接目的,提出改变固定的工资制度,赋予劳动者一定的利润分享权利,有助于经济平稳发展.本文试图对两种观点进行全面的比较研究,以探索不同社会体系下分享经济的本质.     

企业资源配置效率差异与企业边界变动

科斯指出企业和市场是两种不同的配置资源的制度安排,企业内的组织成本和企业间的交易成本决定了企业的边界。不同的企业,其资源配置效率存在着差异,这就决定了企业边界变动的动态性与复杂性。在临界点之前,企业资源配置效率与企业边界变动之间存在着互补性;突破临界点之后,企业边界变动会降低企业资源配置效率。以企业资源配置效率差异为切入点,可以将中间性组织的形成、企业纵向一体化以及企业垂直解体等纳入到一个统一的分析框架。     

企业生产率、国外市场知识与企业出口额

本文运用企业异质性贸易理论,利用分行业上市企业的面板数据,将企业规模作为控制变量,研究了企业生产率、国外市场知识与中国企业出口额的关系。结果显示:企业生产率和国外市场知识对企业出口额的影响显著为正,影响效果存在行业差异;作为控制变量的企业规模,对企业出口额的影响存在不确定性,或正向相关或负向相关或呈U形关系。