Author(s)

Hiroyuki Takami, Tamotsu Nakamura

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

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.

Profit-Sharing; Endogenous Timing; Observable Delay Game

Takami, H. and Nakamura, T. (2012) Profit-Sharing and the Endogenous Order of Moves in Oligopoly. Theoretical Economics Letters, 2, 125-129. doi: 10.4236/tel.2012.22023.