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Efficiency Wages in Cournot-Oligopoly

Marco de Pinto () and Laszlo Goerke ()
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Marco de Pinto: IAAEU, University of Trier

No 12351, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises.

Keywords: oligopoly; efficiency wages; excessive entry; welfare (search for similar items in EconPapers)
JEL-codes: D43 J31 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth and nep-lma
Date: 2019-05
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Working Paper: Efficiency Wages in a Cournot-Oligopoly (2018) Downloads
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