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Lifetime employment contract and reaction functions of profit-maximizing and labor-managed firms


  • Ohnishi, Kazuhiro


This paper considers a model in which a profit-maximizing firm and a labor-managed income-per-worker-maximizing firm are allowed to offer lifetime employment as a strategic commitment. First, both firms simultaneously and independently decide whether to offer lifetime employment. If a firm offers lifetime employment, then it chooses an output level and enters into a lifetime employment contract with the number of employees necessary to achieve the output level. Second, both firms simultaneously and independently choose actual outputs. The paper shows that if the labor-managed firm does not offer lifetime employment, then its reaction function is upward sloping, whereas if it does, then its reaction function changes to downward sloping. The paper also finds that there may be two stable equilibria.

Suggested Citation

  • Ohnishi, Kazuhiro, 2011. "Lifetime employment contract and reaction functions of profit-maximizing and labor-managed firms," Research in Economics, Elsevier, vol. 65(3), pages 152-157, September.
  • Handle: RePEc:eee:reecon:v:65:y:2011:i:3:p:152-157

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    References listed on IDEAS

    1. Ireland, Norman J., 2003. "Random pricing by labor-managed firms in markets with imperfect consumer information," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 573-583, September.
    2. Futagami, Koichi & Okamura, Makoto, 1996. "Strategic Investment: The Labor-Managed Firm and the Profit-Maximizing Firm," Journal of Comparative Economics, Elsevier, vol. 23(1), pages 73-91, August.
    3. Cremer, Helmuth & Cremer, Jacques, 1992. "Duopoly with employee-controlled and profit-maximizing firms: Bertrand vs Cournot competition," Journal of Comparative Economics, Elsevier, vol. 16(2), pages 241-258, June.
    4. Lambertini, Luca & Rossini, Gianpaolo, 1998. "Capital Commitment and Cournot Competition with Labour-Managed and Profit-Maximising Firms," Australian Economic Papers, Wiley Blackwell, vol. 37(1), pages 14-21, March.
    5. Delbono, Flavio & Rossini, Gianpaolo, 1992. "Competition policy vs horizontal merger with public, entrepreneurial, and labor-managed firms," Journal of Comparative Economics, Elsevier, vol. 16(2), pages 226-240, June.
    6. Hugh M. Neary & David Ulph, 1997. "Strategic Investment and the Co-existence of Labour-Managed and Profit-Maximising Firms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 308-328, May.
    7. Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-1320, September.
    8. Ohnishi, Kazuhiro, 2001. "Lifetime Employment Contract and Strategic Entry Deterrence: Cournot and Bertrand," Australian Economic Papers, Wiley Blackwell, vol. 40(1), pages 30-43, March.
    9. Peter J. LAW & Geoff STEWART, 1983. "Stackelberg Duopoly with an Illyrian and Profit-Maximising Firm," Discussion Papers (REL - Recherches Economiques de Louvain) 1983026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Stewart, Geoff, 1992. "Management objectives and strategic interactions among capitalist and labour-managed firms," Journal of Economic Behavior & Organization, Elsevier, vol. 17(3), pages 423-431, May.
    11. Ohnishi, Kazuhiro, 2008. "Strategic commitment and Cournot competition with labor-managed and profit-maximizing firms," Research in Economics, Elsevier, vol. 62(4), pages 188-196, December.
    12. Horowitz, Ira, 1991. "On the effects of cournot rivalry between entrepreneurial and cooperative firms," Journal of Comparative Economics, Elsevier, vol. 15(1), pages 115-121, March.
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    Cited by:

    1. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.


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