Quantity-setting games with lifetime employment contracts as a strategic commitment
This paper considers lifetime employment contracts asa strategic commitment and examines the respectiveequilibrium outcomes of the two cases of a quantity-setting duopoly game with substitute goods and a quantity-setting duopoly game with complementary goods. First, in the quantity-setting game with substitute goods, we ﬁnd that there is an equilibrium in which both the firms adopt lifetime employment. Next, in the quantity-setting game withcomplementary goods, we ﬁnd that there is an equilibrium in which at least one ﬁrm adopts lifetime employment, and that lifetime employment is beneﬁcial for both ﬁrms.
JEL classiﬁcation: C72, D21, L13
quantity-setting model; substitute goods; complementary goods; lifetime employment contract
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