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Profit-Sharing and the Endogenous Order of Moves in Oligopoly
Faculty of Economics, Oita University, Oita, Japan
Graduate School of Economics, Kobe University, Kobe, Japan
- 1 Faculty of Economics, Oita University, Oita, Japan
- 2 Graduate School of Economics, Kobe University, Kobe, Japan
Theoretical Economics Letters·Volume 02 (2012)·Pages 125–129·Published 23 May 2012·DOI10.4236/tel.2012.22023
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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.
KeywordsProfit-SharingEndogenous TimingObservable Delay Game
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