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Firms' ownership, employees’ altruism, and product market competition

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  • De Chiara, Alessandro
  • Manna, Ester

Abstract

The paper considers profit-maximizing (or private) firms and socially-concerned (or public) firms that compete against each other on both prices and quality. In this setting, we study how product market competition affects firms' decision to hire altruistic or selfish employees. We show that public firms will always hire altruistic employees, whereas private firms will hire selfish employees only if (i) products are sufficiently differentiated and (ii) they compete against public firms. Lastly, we determine which market configuration is associated with the highest quality and the overall customers’ utility. We find that mixed duopoly is more likely to be preferred when product market competition is tougher.

Suggested Citation

  • De Chiara, Alessandro & Manna, Ester, 2022. "Firms' ownership, employees’ altruism, and product market competition," Economic Modelling, Elsevier, vol. 109(C).
  • Handle: RePEc:eee:ecmode:v:109:y:2022:i:c:s0264999322000207
    DOI: 10.1016/j.econmod.2022.105774
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    More about this item

    Keywords

    Employees' motivation; Firms' ownership; Hiring decision; Nationalization; Privatization; Vertical and horizontal differentiation;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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