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Efficiency Wages in a Cournot-Oligopoly

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  • Marco de Pinto

    (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University)

  • Laszlo Goerke

    (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University)

Abstract

In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises

Suggested Citation

  • Marco de Pinto & Laszlo Goerke, 2018. "Efficiency Wages in a Cournot-Oligopoly," IAAEU Discussion Papers 201807, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  • Handle: RePEc:iaa:dpaper:201807
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    More about this item

    Keywords

    Oligopoly; Efficiency Wages; Excessive Entry; Welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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