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Profit-Sharing and the Endogenous Order of Moves in Oligopoly

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DOI: 10.4236/tel.2012.22023    5,251 Downloads   8,962 Views   Citations

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.

Conflicts of Interest

The authors declare no conflicts of interest.

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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