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Unemployment and Product Market Competition in a Cournot Model with Efficiency Wage

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Abstract

This paper analyzes the impact of product market competition on unemployment, wage and welfare in a model where unemployment is caused by efficiency wage considerations and oligopolistic firms compete in quantity. It is shown that while more intensive competition in product market increases output and reduces price, it does not necessarily lead to a lower unemployment rate or a higher wage for workers. Consequently, the relationship between the intensity of competition and the level of employment (respectively, wage, welfare) is not monotonic, and, in some instances, has an inverted-U shape.

Suggested Citation

  • Zhiqi Chen & Bo Zhao, 2010. "Unemployment and Product Market Competition in a Cournot Model with Efficiency Wage," Carleton Economic Papers 10-04, Carleton University, Department of Economics.
    • Handle: RePEc:car:carecp:10-04
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    Cited by:

    1. Domenico Buccella & Luciano Fanti & Luca Gori, 2024. "Competitive wages and tax evasion in a Cournot duopoly," Theory and Decision, Springer, vol. 97(3), pages 585-594, November.
    2. de Pinto Marco & Goerke Laszlo, 2019. "Efficiency Wages in Cournot-Oligopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-13, October.
    3. Domenico Buccella & Luciano Fanti & Luca Gori, 2023. "Tax evasion in a Cournot duopoly with unions," Discussion Papers 2023/293, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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    More about this item

    Keywords

    Cournot competition; unemployment; efficiency wage;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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