Strategic Investment in a Labour‐managed Duopoly

Abstract

Developing a Cournot two-stage game model with strategic capital interaction, we compare two different kinds of equilibrium in a labourmanaged (LM) duopoly. An LM firm's reaction function is negatively sloped when capital and output are simultaneously determined, while the slope of its reaction function in the second stage changes in sign depending on the magnitude of its labour-expansion elasticity. Hence, whether the LM firms employ more capital and produce greater output at the equilibria in the two-stage game model than at the equilibria resulting from the simultaneous selection of capital and output depends on the magnitude of their labour-expansion elasticity.

Insufficient Entry of Employee‐controlled Firms in a Free‐entry Oligopoly

“…Cremer and Cremer () examined mixed duopoly competition in both Cournot and Bertrand competition with ECFs and PMFs, and compared the resulting equilibria with those when both firms are profit maximizers. Using a two‐stage game model, Miyamoto () investigated strategic investment in an employee‐controlled duopoly…”