Strategic commitment and Cournot competition with labor-managed and profit-maximizing firms |
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Authors: | Kazuhiro Ohnishi |
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Institution: | aOsaka University and Institute for Basic Economic Science, Japan |
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Abstract: | This paper examines the behavior of a labor-managed income-per-member-maximizing firm and a profit-maximizing firm in a quantity-setting model with a strategic commitment. First, each firm independently decides whether or not to make a commitment to capacity. This capacity may subsequently be increased, but cannot be decreased. Hence, each firm’s investment choice changes its capital cost from a variable one into a fixed one. Second, each firm independently chooses its actual output. The paper examines the equilibrium of the quantity-setting mixed model and shows whether or not capacity investment is effective for the labor-managed firm and the profit-maximizing firm. |
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Keywords: | Labor-managed firm Profit-maximizing firm Strategic commitment |
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