Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies
AbstractThe instability of Cournot cartels can be overcome by a collective wage agreement if this agreement stipulates minimum fixed wages and piece rates that are legally enforceable. This new view on the institution of collective wage agreements is not only relevant for strategic management, it also has an important implication for economic policy: competition authorities should observe such agreements for their potentially collusive effect on product markets. Moreover, the model contributes to the explanation of the “fixed wage puzzle”, i.e., the observation that firms pay lower than efficient variable wages and higher fixed wages than predicted by contract theory.
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Bibliographic InfoPaper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 07004.
Length: 16 pages
Date of creation: Feb 2007
Date of revision:
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Piece rate; fixed wage; collective wage agreements;
Other versions of this item:
- Kirstein, Roland & Kirstein, Annette, 2004. "Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies," CSLE Discussion Paper Series 2004-09, Saarland University, CSLE - Center for the Study of Law and Economics.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-BEC-2007-05-12 (Business Economics)
- NEP-COM-2007-05-12 (Industrial Competition)
- NEP-LAB-2007-05-12 (Labour Economics)
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