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Are Workers' Enterprises Entry Policies Conventional?

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  • Michele Moretto
  • Gianpaolo Rossini

Abstract

One of the reasons why workers' enterprises (WE) still represent a relevant chunk of the economy may lay in some affinities with conventional profit-maximizing firms. To provide a solid basis to this presumption, we compare the entry policies of WEs and conventional firms when size is set at entry and kept fixed afterwards. Even though short-run differences remain between WEs and conventional firms, a long-run coincidence appears in an uncertain dynamic environment. Endogenizing size and time of entry we see that the two kinds of firms enter at the same trigger market price and size. Both of them enter earlier and choose a dimension larger than the minimum efficient scale. This generalized coincidence may be another way to explain why WEs still make for an important share of the economy despite the ongoing mantra of their imminent demise. Copyright 2008 The Authors. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2008.

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Bibliographic Info

Article provided by CEIS in its journal LABOUR.

Volume (Year): 22 (2008)
Issue (Month): 2 (06)
Pages: 369-381

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Handle: RePEc:bla:labour:v:22:y:2008:i:2:p:369-381

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  1. Michele Moretto & Gianpaolo Rossini, 2005. "Start-up Entry Strategies: Employer vs. Nonemployer firms," Working Papers 2005.13, Fondazione Eni Enrico Mattei.
  2. Dixit, Avinash & Pindyck, Robert S & Sodal, Sigbjorn, 1999. "A Markup Interpretation of Optimal Investment Rules," Economic Journal, Royal Economic Society, vol. 109(455), pages 179-89, April.
  3. Pestieau, P. & Thisse, J. -F., 1979. "On market imperfections and labor management," Economics Letters, Elsevier, vol. 3(4), pages 353-356.
  4. Leahy, John V, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1105-33, November.
  5. Sertel, Murat R., 1991. "Workers' enterprises in imperfect competition," Journal of Comparative Economics, Elsevier, vol. 15(4), pages 698-710, December.
  6. Fehr, Ernst & Sertel, Murat R., 1993. "Two forms of workers' enterprises facing imperfect labor markets," Economics Letters, Elsevier, vol. 41(2), pages 121-127.
  7. Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 691-721.
  8. Craig, Ben & Pencavel, John, 1992. "The Behavior of Worker Cooperatives: The Plywood Companies of the Pacific Northwest," American Economic Review, American Economic Association, vol. 82(5), pages 1083-105, December.
  9. Martin Cihák & Heiko Hesse, 2007. "Cooperative Banks and Financial Stability," IMF Working Papers 07/2, International Monetary Fund.
  10. R. Cellini & L. Lambertini, 2004. "Workers' Enterprises Are Not Perverse: Differential Oligopoly Games with Sticky Price," Working Papers 531, Dipartimento Scienze Economiche, Universita' di Bologna.
  11. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
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