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Why labor-managed firms may not be socially desirable

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  • Ohnishi, Kazuhiro

Abstract

We employ a game-theoretic model to analyze five duopoly regimes: (1) state-owned and labor-managed firms, (2) labor-managed firms, (3) state-owned and capitalist firms, (4) capitalist firms, and (5) capitalist and labor-managed firms. We compare the welfare outcomes across these regimes and find that labor-managed firms may not be socially desirable due to their adverse impact on economic welfare. This may help explain why labor-managed firms are relatively rare compared to capitalist firms.

Suggested Citation

  • Ohnishi, Kazuhiro, 2025. "Why labor-managed firms may not be socially desirable," MPRA Paper 126158, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:126158
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    References listed on IDEAS

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    1. L. Lambertini & G. Rossini, 1995. "Are Labor-Managed Firms Really Able to Survive Competition With Profit-Maximizing Firms?," Working Papers 222, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Hill, Martyn & Waterson, Michael, 1983. "Labor-managed Cournot oligopoly and industry output," Journal of Comparative Economics, Elsevier, vol. 7(1), pages 43-51, March.
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    4. Roberto Cellini & Luca Lambertini, 2006. "Workers’ enterprises are not perverse: differential oligopoly games with sticky price," Review of Economic Design, Springer;Society for Economic Design, vol. 10(3), pages 233-248, December.
    5. 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.
    6. Loek Groot & Daan van der Linde, 2017. "The Labor-Managed Firm: Permanent or Start-Up Subsidies?," Journal of Economic Issues, Taylor & Francis Journals, vol. 51(4), pages 1074-1093, October.
    7. 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.
    8. Svetozar Pejovich, 1992. "Why Has the Labor-Managed Firm Failed?," Cato Journal, Cato Journal, Cato Institute, vol. 12(2), pages 461-473, Fall.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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