Thumbnail - Request a copy

Negotiation of profit-sharing contracts in industry

Bensaid, Bernard; Gary-Bobo, Robert J. (1991), Negotiation of profit-sharing contracts in industry, European Economic Review, 35, 5, p. 1069-1085. http://dx.doi.org/10.1016/0014-2921(91)90005-4

Type
Article accepté pour publication ou publié
Date
1991
Journal name
European Economic Review
Volume
35
Number
5
Publisher
Elsevier
Pages
1069-1085
Publication identifier
Metadata
Show full item record
Author(s)
Bensaid, Bernard
Gary-Bobo, Robert J.
Abstract (EN)
We examine the properties of profit-sharing in a game-theoretic oligopoly model of industry. Profit-sharing contracts are viewed as a means of strategic commitment, not as an internal incentive system. In our model, firms choose a contract subject to the employees' participation constraint in a first stage, and compete on the output market in a second stage. We show that the choice of a profit-sharing contract by each firm is a non-cooperative equilibrium. In the case of Cournot competition, the game under study has the structure of the Prisoners' Dilemma. The case of price competition on the output market leads to somewhat different conclusions.
Subjects / Keywords
game-theoretic oligopoly model