Wednesday, December 12, 2018

Efficiency Wages in a Cournot-Oligopoly

Marco de Pinto (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University) and Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University) describe Efficiency Wages in a Cournot-Oligopoly.

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

https://lawprofessors.typepad.com/antitrustprof_blog/2018/12/efficiency-wages-in-a-cournot-oligopoly.html

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