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Strategic Investment and the Co-existence of Labour-Managed and Profit-Maximising Firms

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  • Hugh M. Neary
  • David Ulph

Abstract

The authors examine firm profitability in mixed duopoly equilibrium with one labor managed (LM) firm and one profit maximizing (PM) firm, and with strategic investment. Conventional wisdom suggests that firms deviating from profit-maximization will suffer forced exit in the long run. The authors reverse this conclusion. In mixed LM-PM duopoly with strategic investment, no equilibrium can have both firms making zero profits, and PM profitability implies LM profitability, but not the converse. Adverse parameter shifts would cause the PM firm to exit first. Empirical evidence is consistent with this prediction of robust market survivability of LM firms.

Suggested Citation

  • Hugh M. Neary & David Ulph, 1997. "Strategic Investment and the Co-existence of Labour-Managed and Profit-Maximising Firms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 308-328, May.
    • Handle: RePEc:cje:issued:v:30:y:1997:i:2:p:308-28
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    Citations

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    Cited by:

    1. Kazuhiro Ohnishi, 2013. "A Two-production-period Model with State-owned and Labour-managed Firms," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 5(1), pages 41-56, April.
    2. Kazuhiro Ohnishi, 2019. "Capacity choice in an international mixed triopoly," Working Papers e140, Tokyo Center for Economic Research.
    3. Kazuhiro Ohnishi, 2009. "Strategic Commitment and Three-Stage Games with Labour-Managed and Profit-Maximizing Firms," Finnish Economic Papers, Finnish Economic Association, vol. 22(2), pages 63-74, Autumn.
    4. Ohnishi, Kazuhiro, 2011. "Lifetime employment contract and reaction functions of profit-maximizing and labor-managed firms," Research in Economics, Elsevier, vol. 65(3), pages 152-157, September.
    5. Kazuhiro Ohnishi, 2009. "Capacity Investment and Mixed Duopoly with State-Owned and Labor-Managed Firms," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 49-64, May.
    6. Ohnishi, Kazuhiro, 2008. "Strategic commitment and Cournot competition with labor-managed and profit-maximizing firms," Research in Economics, Elsevier, vol. 62(4), pages 188-196, December.
    7. Ireland, Norman J., 2003. "Random pricing by labor-managed firms in markets with imperfect consumer information," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 573-583, September.
    8. Giannakas, Konstantinos & Fulton, Murray E., 2003. "Agricultural Cooperatives And Cost-Reducing R&D In The Agri-Food System," 2003 Annual meeting, July 27-30, Montreal, Canada 22193, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Ohnishi, Kazuhiro, 2019. "Capacity choice in an international mixed triopoly," MPRA Paper 94051, University Library of Munich, Germany.
    10. Podivinsky, Jan M. & Stewart, Geoff, 2007. "Why is labour-managed firm entry so rare?: An analysis of UK manufacturing data," Journal of Economic Behavior & Organization, Elsevier, vol. 63(1), pages 177-192, May.
    11. Kazuhiro Ohnishi, 2022. "Lifetime Employment and Stackelberg Mixed Duopoly Games with a Foreign Labour-Managed Competitor," Arthaniti: Journal of Economic Theory and Practice, , vol. 21(1), pages 27-42, June.
    12. Podivinsky, Jan & Stewart, Geoff, 2003. "Why are labour-managed firms so rare? An analysis of entry using UK panel data," Discussion Paper Series In Economics And Econometrics 0402, Economics Division, School of Social Sciences, University of Southampton.
    13. Baniak, Andrzej, 2000. "A Note on Comparative Statics for a Labor-Managed Firm Engaged in Exporting," Journal of Comparative Economics, Elsevier, vol. 28(3), pages 619-625, September.

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