Wage-Rise Contract and Mixed Duopoly with Price Competition

Kazuhiro Ohnishi

International Journal of Management, Accounting and Economics, 2017, vol. 4, issue 9, 898-908

Abstract: This paper investigates a mixed duopoly environment in which a private firm competes on price with a public firm. The following timing of actions is considered. In the first stage, each firm non-cooperatively decides whether to adopt a wage-rise contract as a strategic commitment device. If a firm adopts a wage-rise contract, then it chooses an output level and a wage premium rate, and agrees to pay each employee a wage premium uniformly if it actually produces more than the output level. This irreversible behaviour causes changes to the price-competing market environment of the second stage. The paper presents the equilibrium solution of the mixed duopoly model.

Keywords: Mixed market model; price competition; private firm; public firm; strategic commitment (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:air:journl:v:4:y:2017:i:9:p:898

DOI: 10.5281/zenodo.17521070

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