Buying Versus Hiring - An Indirect Evolutionary Approach

Siegfried K. Berninghaus and Werner Güth ()

Discussion Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: On an otherwise symmetric oligopoly market with stochastic demands for heterogeneous products firms can either hire an employee or partner or buy the required labor input on the labor market. Whereas the wage of hired labor does not depend in the realization of stochastic demand, the price of bought labor input reacts positively to product demand. We first solve the market by deriving the equilibrium price vector. We then assume that the number of hiring firms will tend to increase when hiring firms make higher profits than non-hiring firms. We explicitly derive the stationary distribution of the thus defined stochastic adaptation process.

Keywords: (Indirect) evolution; asymmetric oligopoly; employment contracts; stochastic markets (search for similar items in EconPapers)
JEL-codes: C72 D43 (search for similar items in EconPapers)
Date: 2002-09
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