Document Type : Original Research

Author

Department of Economics, Institute for Economic Sciences, Kobe, Japan

Abstract

This paper investigates a duopoly game model in which two labor-managed firms compete in quantities. The game proceeds as follows. In the first stage, each labor-managed firm independently and simultaneously chooses the corporate social responsibility (CSR) level. In the second stage, each labor-managed firm independently and simultaneously chooses whether or not to offer the wage-rise contract policy (WRCP) as a strategic commitment device. If a labor-managed firm offers WRCP, it decides an output level and a wage premium rate. In addition, the labor-managed firm agrees to pay each employee a wage premium uniformly, provided that it actually produces more than the chosen output. At the end of the game, each labor-managed firm independently and simultaneously chooses an actual output. First, the paper examines the reaction functions of labor-managed firms in the model and shows that the reaction functions of labor-managed firms are upward-sloping. Next, this paper discusses the equilibrium of the model and shows that there is an equilibrium in which each labor-managed firm does not use CSR as a business strategy.

Keywords

Main Subjects

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©2024 The Author(s). This is an open access article distributed under the terms of the Creative Commons Attribution (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, as long as the original authors and source are cited. No permission is required from the authors or the publishers.

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