Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies
Roland Kirstein and
No 2004-09, CSLE Discussion Paper Series from Saarland University, CSLE - Center for the Study of Law and Economics
The need for intra-firm incentive schemes allows remodeling the Cournot duopoly in wages (rather than in output levels). In both versions of the Cournot model, a cartel agreement is unstable. The new formulation, however, allows us to demonstrate that a collective wage agreement on minimum wages can stabilize the cartel solution. Beyond its relevance for strategic management, this result has a policy implication: competition authorities should observe collective wage agreements for their potential collusive effect on product markets. Moreover, the model may provide a new explanation why firms in reality pay lower than efficient variable wages and higher fixed wages than predicted by contract theory.
Keywords: Principal-agent theory; piece rate; fixed wage; collective wage agreements; Nash bargaining solution (search for similar items in EconPapers)
JEL-codes: C72 J50 L41 J33 K31 D43 C78 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Working Paper: Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:csledp:200409
Access Statistics for this paper
More papers in CSLE Discussion Paper Series from Saarland University, CSLE - Center for the Study of Law and Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().