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Earnings, Coalitions and the Stability of the Firm

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  • Marini, Marco A.

Abstract

This paper presents an economy in which workers hired by a firm receive without cost a firm-specific training that enables them to potentially become independent producers. Thus, this specific training changes a worker's outside option according to the firm in which he works. Under such circumstances, by modelling explicitly the workers' decision to stay or to leave the firm, the paper determines a stable arning profile of the economy. Two main results are obtained by this approach. Firstly, that such a stable earning profile can allow for a vector of wages higher than the basic neoclassical wage and for wages differentials across industries even for initially homogenous workers; secondly, that an industry equilibrium wage depends upon the relative degree of competition existing therein. Both the results seem to match labour markets empirical evidence. Furthermore, a game-theoretic framework is introduced to characterize a stable earning profile as a particular case of core of an economy with coalitions of players behaving à la Nash in the product market.

Suggested Citation

  • Marini, Marco A., 1998. "Earnings, Coalitions and the Stability of the Firm," MPRA Paper 70728, University Library of Munich, Germany, revised 2012.
    • Handle: RePEc:pra:mprapa:70728
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    File URL: https://mpra.ub.uni-muenchen.de/70728/1/MPRA_paper_70728.pdf
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    References listed on IDEAS

    as
    1. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-Industry Wage Differentials In EU Countries: What Do Cross-Country Time Varying Data Add to the Picture?," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 478-486, 04-05.
    2. Zhao, Jingang, 1992. "The hybrid solutions of an N-person game," Games and Economic Behavior, Elsevier, vol. 4(1), pages 145-160, January.
    3. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
    4. Mariagiovanna Baccara & Ronny Razin, 2007. "Bargaining Over New Ideas: The Distribution of Rents and the Stability of Innovative Firms," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1095-1129, December.
    5. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-industry wage differentials in EU countries : What do cross-country time-varying data add to the picture ?," Working Paper Research 189, National Bank of Belgium.
    6. Amir, Rabah, 1996. "Cournot Oligopoly and the Theory of Supermodular Games," Games and Economic Behavior, Elsevier, vol. 15(2), pages 132-148, August.
    7. Marini, Marco A., 2006. "The value of a new idea: knowledge transmission, workers’ mobility and market structure," Chaos, Solitons & Fractals, Elsevier, vol. 29(3), pages 697-706.
    8. George J. Mailath & Andrew Postlewaite, 1990. "Workers Versus Firms: Bargaining Over a Firm's Value," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 369-380.
    9. Feinstein, Jonathan S. & Stein, Jeremy, 1988. "Employee opportunism and redundancy in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 10(4), pages 401-414, December.
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    Cited by:

    1. Marco, Marini, 1997. "Managers Compensation and Collusive Behaviour under Cournot Oligopoly," MPRA Paper 31871, University Library of Munich, Germany.

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    More about this item

    Keywords

    Wage Negotiation; Oligopoly; Coalitions; Firm's Stability.;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D2 - Microeconomics - - Production and Organizations
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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