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Are Workers Enterprises Entry Policies Conventional?

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Author Info

  • Michele Moretto

    ()
    (Universita' di Padova)

  • Gianpaolo Rossini

    ()
    (University of Bologna)

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 generalised coincidence may be another way to explain why WEs still make for an important share of the economy (Hesse and Cihàk, 2007) despite the ongoing mantra of their imminent demise.

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Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0066.

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Length: 13 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:pad:wpaper:0066

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Keywords: Workers' enterprises; entry; uncertainty; rigidity;

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  1. 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.
  2. 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.
  3. Michele Moretto & Gianpaolo Rossini, 2005. "Start-up Entry Strategies: Employer vs. Nonemployer firms," Working Papers 2005.13, Fondazione Eni Enrico Mattei.
  4. 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.
  5. Roberto Cellini & Luca Lambertini, 2006. "Workers’ enterprises are not perverse: differential oligopoly games with sticky price," Review of Economic Design, Springer, vol. 10(3), pages 233-248, December.
  6. 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.
  7. Sertel, Murat R., 1991. "Workers' enterprises in imperfect competition," Journal of Comparative Economics, Elsevier, vol. 15(4), pages 698-710, December.
  8. Martin Cihák & Heiko Hesse, 2007. "Cooperative Banks and Financial Stability," IMF Working Papers 07/2, International Monetary Fund.
  9. Pestieau, P. & Thisse, J. -F., 1979. "On market imperfections and labor management," Economics Letters, Elsevier, vol. 3(4), pages 353-356.
  10. 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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