Earnings, Coalitions and the Stability of the Firm

Marco Marini

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents an economy in which workers hired by a firm receive without cost a firm-specific training that enables them to potentially become independent producers. Thus, this specific training changes a worker's outside option according to the firm in which he works. Under such circumstances, by modelling explicitly the workers' decision to stay or to leave the firm, the paper determines a stable arning profile of the economy. Two main results are obtained by this approach. Firstly, that such a stable earning profile can allow for a vector of wages higher than the basic neoclassical wage and for wages differentials across industries even for initially homogenous workers; secondly, that an industry equilibrium wage depends upon the relative degree of competition existing therein. Both the results seem to match labour markets empirical evidence. Furthermore, a game-theoretic framework is introduced to characterize a stable earning profile as a particular case of core of an economy with coalitions of players behaving à la Nash in the product market.

Keywords: Wage Negotiation; Oligopoly; Coalitions; Firm's Stability. (search for similar items in EconPapers)
JEL-codes: D0 D2 D21 D4 D43 (search for similar items in EconPapers)
Date: 1998-06, Revised 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Applied Mathematical Sciences 6.139(2012): pp. 6943-6957

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