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A Note on Holding Excess Capacity to Deter Entry in a Labour-Managed Industry

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  • Shoji Haruna

Abstract

In this paper, J. Zhang's (1993) investigation on whether an established labor-managed firm carries capacity that would be left idle if entry did not occur is reconsidered. To analyze the use of excess capacity as an entry deterrent, the author presents an extended model with a general constant-returns-to-scale production function instead of the Leontief production function assumed by Zhang. It is shown that the result of Zhang that the labor-managed firm LMF carries excess capacity also holds for the constant-returns-to-scale production function. Furthermore, the author examines the global stability of the labor-managed firm postentry Nash equilibrium.

Suggested Citation

  • Shoji Haruna, 1996. "A Note on Holding Excess Capacity to Deter Entry in a Labour-Managed Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 29(2), pages 493-499, May.
  • Handle: RePEc:cje:issued:v:29:y:1996:i:2:p:493-99
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    Citations

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    Cited by:

    1. Leach, J. Chris & Moyen, Nathalie & Yang, Jing, 2013. "On the strategic use of debt and capacity in rapidly expanding markets," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 332-344.
    2. Tsuyoshi Toshimitsu, 2020. "On excess capacity in a monopoly market with network externalities," Discussion Paper Series 220, School of Economics, Kwansei Gakuin University.
    3. Luciano Fanti & Nicola Meccheri, 2014. "Capacity choice and welfare under alternative unionisation structures," Discussion Papers 2014/176, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Yoshihiro Tomaru & Yasuhiko Nakamura & Masayuki Saito, 2009. "Capacity Choice in a Mixed Duopoly with Managerial Delegation," Economics Bulletin, AccessEcon, vol. 29(3), pages 1904-1924.
    5. repec:ebl:ecbull:v:12:y:2004:i:2:p:1-7 is not listed on IDEAS
    6. Ann Horowitz & Ira Horowitz, 1999. "Quality choice: Does it matter which workers own and manage the cooperative firm?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(4), pages 394-409, December.
    7. Hikaru Ogawa & Akira Nishimori, 2004. "Do Firms Always Choose Excess Capacity?," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.
    8. Luciano Fanti & Nicola Meccheri, 2017. "Unionization Regimes, Capacity Choice by Firms and Welfare Outcomes," Manchester School, University of Manchester, vol. 85(6), pages 661-681, December.
    9. Goel, Rajeev K. & Haruna, Shoji, 2007. "Cooperative and noncooperative R&D with spillovers: The case of labor-managed firms," Economic Systems, Elsevier, vol. 31(4), pages 423-440, December.
    10. Nakamura, Yasuhiko, 2014. "Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 105-117.
    11. Kazuhiro Ohnishi, 2009. "Strategic Commitment and Three-Stage Games with Labour-Managed and Profit-Maximizing Firms," Finnish Economic Papers, Finnish Economic Association, vol. 22(2), pages 63-74, Autumn.
    12. Kangsik Choi & DongJoon Lee, 2020. "Do firms choose overcapacity or undercapacity in a vertical structure?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 839-847, July.

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