International Journal of Management, Accounting and Economics
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Volume 4, No. 9, September 2017 Pages: 898 - 908
Wage-Rise Contract and Mixed Duopoly with Price Competition
This paper investigates a mixed duopoly environment in which a private firm competes on price with a public firm. The following timing of actions is considered. In the first stage, each firm non-cooperatively decides whether to adopt a wage-rise contract as a strategic commitment device. If a firm adopts a wage-rise contract, then it chooses an output level and a wage premium rate, and agrees to pay each employee a wage premium uniformly if it actually produces more than the output level. This irreversible behaviour causes changes to the price-competing market environment of the second stage. The paper presents the equilibrium solution of the mixed duopoly model.
Mixed market model, price competition, private firm, public firm, strategic commitment.
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