Competitive Equilibrium of an Industry with Labor Managed Firms and Price Risk
This paper studies the effect of output-price uncertainty in an industry comprised of labor-managed firms (LMFs) in which the number of LMFs and their membership are determined endogenously. The exit condition for a risk-averse LMF member is formulated and the effect of various economic variables on the equilibrium quantities and prices are examined. We find that the equilibrium in our setting is similar to the one that emerges in a â€˜capitalisticâ€™ economy where firms are owned by profit-maximizing agents. However, the effects of increases in risk and risk aversion differ from those found in a short-run analysis of a single LMF.
Volume (Year): 34 (2006)
Issue (Month): 1 ()
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- Appelbaum, Elie & Katz, Eliakim, 1986. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium," American Economic Review, American Economic Association, vol. 76(3), pages 524-29, June.
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- Horowitz, Ira, 1982. "More on the theory of the competitive labor-managed firm under price uncertainty," Journal of Comparative Economics, Elsevier, vol. 6(3), pages 269-272, September.
- Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
- Podivinsky, Jan & Stewart, Geoff, 2003. "Why are labour-managed firms so rare? An analysis of entry using UK panel data," Discussion Paper Series In Economics And Econometrics 0402, Economics Division, School of Social Sciences, University of Southampton.
- Bonin, John P., 1980. "On the theory of the competitive labor-managed firm under price uncertainty: A correction," Journal of Comparative Economics, Elsevier, vol. 4(3), pages 331-337, September.
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