Strategic Entry Interactions Involving Profit-Maximising and Labour-Managed Firms

Geoff Stewart

Oxford Economic Papers, 1991, vol. 43, issue 4, 570-83

Abstract: What determines the choice between capitalist and cooperative modes of production? Existing economic explanations focus on productive efficiency and the requirement in a cooperative that an entrepreneur share any surplus with the work force. The author shows that the entry process can also play a role. An incumbent able to engage in strategic behavior is more likely to accommodate an Illyrian labor-managed firm than a profit-maximizer into the industry. The organizational form of the incumbent is also considered. An excess capacity strategy to deter potential entry is more likely, and may take a more extreme form, when the incumbent is labor-managed. Copyright 1991 by Royal Economic Society.

Date: 1991
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