Profit-Sharing and the Endogenous Order of Moves in Oligopoly

Hiroyuki Takami, Tamotsu Nakamura

Faculty of Economics, Oita University, Oita, Japan.
Graduate School of Economics, Kobe University, Kobe, Japan.

DOI: 10.4236/tel.[phone]                

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.

Keywords

Profit-Sharing; Endogenous Timing; Observable Delay Game

Conflicts of Interest

The authors declare no conflicts of interest.

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