Marini, Marco
(1998)
Wages determination and firm's behaviour under strategic market competition.
PhD thesis, London School of Economics and Political Science.
Abstract
It is commonplace in wage determination models and, in general, in economic models as a whole, to treat the workers' outside option as given. The main purpose of the present work is to remove, in various ways, this assumption. The work is organized as follows. The first chapter is devoted to introducing the thesis topic and the related literature. The second chapter describes an economy in which the workers hired by a firm acquire without cost a firm-specific skill that enables them to potentially become independent producers. Thus, by modelling explicitly the workers' decision to stay or to leave the firm, a stable earning profile for the economy is characterized. Such a stable earning profile can allow for a workers' compensation higher than the basic neoclassical wage and for pay differentials across industries even for initially homogenous workers. The third chapter shows that the existence of a concrete outside option for firms' managers can induce, under specific circumstances, oligopolistic firms to adopt restrictive output practises. In particular, the conditions under which, in a Cournot oligopoly, existing firms behave more collusively than in a standard Cournot model, are carefully defined. The fourth chapter considers the problem of producer co-operatives' (PCs) stability. It shows that PCs' instability argued in the literature can fail to hold in very competitive and low barrier-to-entry markets in which, potentially, dismissed members have a chance to set up new firms. In the fifth and conclusive chapter a new concept of core-stability for n-cooperative games is introduced and applied both to the problem of cartel formation under oligopoly and to an economy with a public good. Such a solution concept, denoted o-core, assumes that when a coalition deviates from an agreement, it possesses a first-mover advantage with respect to all other players.
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