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A Model of a Price‐setting Duopoly with a Wage‐rise Contract

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  • Kazuhiro Ohnishi

Abstract

This paper considers a wage‐rise contract between a firm and its employees as the firm's strategy, and suggests a wage‐rise‐contract policy. The policy is a promise by the firm that it will announce a certain output level and a wage premium rate, and if it actually produces more than the announced output level, then it will pay each employee a wage premium uniformly. First, this paper examines the case in which one of two firms unilaterally offers the wage‐rise‐contract policy by using a two‐stage price‐setting duopoly model. It is then shown that there exists an equilibrium which coincides with the Stackelberg solution where the firm adopting the policy is the leader. Next, this paper examines the case in which both firms can offer the wage‐rise‐contract policy in the model. It is then shown that there exists an equilibrium which is more profitable for both firms than in the unilateral case.

Suggested Citation

  • Kazuhiro Ohnishi, 2003. "A Model of a Price‐setting Duopoly with a Wage‐rise Contract," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 149-157, June.
    • Handle: RePEc:bla:ausecp:v:42:y:2003:i:2:p:149-157
    DOI: 10.1111/1467-8454.00192
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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    Cited by:

    1. Hattori, Keisuke, 2016. "Profit-maximizing Wages under Duopoly," MPRA Paper 70288, University Library of Munich, Germany.
    2. Kazuhiro Ohnishi, 2007. "Wage-Rise Contract and Entry Deterrence: Bertrand and Cournot," Annals of Economics and Finance, Society for AEF, vol. 8(1), pages 155-165, May.
    3. Kazuhiro Ohnishi, 2014. "Sequential Mixed Competition with a Foreign Joint-stock Firm," International Journal of Social Sciences and Management Studies (IJSSMS), The Economics and Social Development Organization (TESDO), vol. 1(2), pages 38-52, June.
    4. Ohnishi, Kazuhiro, 2018. "Wage-Rise Contract and Labour-Managed Cournot Oligopoly with Complementary Goods," MPRA Paper 88235, University Library of Munich, Germany.
    5. Ohnishi, Kazuhiro, 2022. "Wage-rise contract and mixed Cournot duopoly competition with profit-maximizing and socially concerned firms," MPRA Paper 112536, University Library of Munich, Germany.
    6. Ohnishi, Kazuhiro, 2010. "Wage-rise contract and endogenous timing in international mixed duopoly," Research in Economics, Elsevier, vol. 64(2), pages 121-127, June.
    7. Ohnishi, Kazuhiro, 2023. "Why firms should care for consumers: Complementary goods," MPRA Paper 117305, University Library of Munich, Germany.
    8. Kazuhiro Ohnishi, 2010. "A Unilateral Pricing Policy And The Stackelberg Equilibrium," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 205-210.
    9. Kazuhiro Ohnishi, 2010. "A Three‐Stage International Mixed Duopoly With A Wage‐Rise Contract As A Strategic Commitment," Manchester School, University of Manchester, vol. 78(4), pages 279-289, July.
    10. Kazuhiro Ohnishi, 2011. "A Quantity-Setting Mixed Duopoly with Inventory Investment as a Coordination Device," Annals of Economics and Finance, Society for AEF, vol. 12(1), pages 109-119, May.

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