No abstract

Whether firms move sequentially or simultaneously is one of the most important questions in the oligopoly theory. Forms of firms and/or their remuneration systems influence the decisions. This paper analyzes the effect of profit-sharing on the endogenous order of moves in a wage-setting stage of a unionized duopoly where one adopts profit-sharing while the other does not. It is shown that the two firms do not move simultaneously. In addition, if a fraction of profits going to the union is large, the Stackelberg equilibrium with the profit sharing firm moving first emerges endogenously.

In this paper, we study the effects of the Profit-Sharing rule on an oligopolistic economy. Many believed that the Japanese economy was strong because Japan adopted the Profit-Sharing rule (or the Japanese management system) in the 1980s. However, Japan was trapped in a prolonged recession after the collapse of the bubble economy in the 1990s. The Japanese management system and its regulated financial system have come under criticism as factors of the crisis. We derive a condition that a firm and its union adopt the Profit-Sharing rule voluntarily and construct a macrodynamic model of financial instability. We demonstrate in this study that the Profit-Sharing rule in Japan further stabilises the economy when the financial structure of the economy is already stable.