TEL> Vol.2 No.2, May 2012

Profit-Sharing and the Endogenous Order of Moves in Oligopoly

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ABSTRACT

Whether firms move sequentially or simultaneously is one of the most important questions in the oligopoly theory. Forms of firms and/or their remuneration systems influence the decisions. This paper analyzes the effect of profit-sharing on the endogenous order of moves in a wage-setting stage of a unionized duopoly where one adopts profit-sharing while the other does not. It is shown that the two firms do not move simultaneously. In addition, if a fraction of profits going to the union is large, the Stackelberg equilibrium with the profit sharing firm moving first emerges endogenously.

Cite this paper

H. Takami and T. Nakamura, "Profit-Sharing and the Endogenous Order of Moves in Oligopoly," Theoretical Economics Letters, Vol. 2 No. 2, 2012, pp. 125-129. doi: 10.4236/tel.2012.22023.

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