Efficiency-wage competition: What happens as the number of players increases?

Marco Guerrazzi

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, I explore the consequences of extending the number of firms in an efficiency-wage competition framework. In this setting, I show that the effort function shape is crucial in determining key features of the model economy. Specifically, with a concave (sigmoid) effort function, the wage and the employment levels prevailing in a symmetric Nash equilibrium are, respectively, lower (higher) and higher (lower), the higher the number of competing firms. Moreover, assuming that firms adjust their wages on the basis of lagged wage bids, the adoption of a concave (sigmoid) effort function reveals that the symmetric Nash equilibrium is unstable (stable) and the speed of divergence (convergence) is an increasing function of the number of firms. Furthermore, with a concave (sigmoid) effort function the full employment equilibrium is characterized by a monopsonistic exploitation of labour that increases (decreases) with the number of productive units required to sustain that allocation. Those findings have intriguing implications for the existence of involuntary unemployment as well as for policies aimed at increasing employment.

Keywords: Efficiency-wage competition; Number of competitors; Effort function; Nash equilibrium; Monopsonistic exploitation (search for similar items in EconPapers)
JEL-codes: C72 E12 E24 J41 (search for similar items in EconPapers)
Date: 2017-03-27
New Economics Papers: this item is included in nep-gth and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/77950/1/MPRA_paper_77950.pdf original version (application/pdf)

Related works:
Journal Article: Efficiency-Wage Competition: What Happens as the Number of Players Increases? (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:77950

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().