International Journal of Management, Accounting and Economics
Hits: 1423 Times
Downloads: 945 Times
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.
Full Text (PDF)