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Unemployment and product market competition in a Cournot model with efficiency wages

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  • Zhiqi Chen
  • Bo Zhao

Abstract

This paper analyzes the impact of product market competition on unemployment, wage and welfare in a model where unemployment is caused by the efficiency wage consideration and oligopolistic firms compete in quantity. It is shown that while more intense competition in the product market increases output and reduces price, it does not necessarily lead to a lower unemployment rate or a higher wage for workers. Depending on the technologies, the relationship between the intensity of competition and the level of employment (respectively, wage, welfare) is not always monotonic, and, in some instances, has an inverted U‐shape. Chômage et concurrence dans le marché du produit dans un modèle à la Cournot en présence de salaires d'efficience. Ce texte analyse l'impact de la concurrence dans le marché du produit sur le chômage, le salaire et bien‐être dans un modèle où le chômage est causé par des considérations de salaires d'efficience et où les firmes oligopolistiques se concurrencent par les quantités. On montre que même si une concurrence plus intense dans le marché du produit accroît la production et réduit le prix, ceci n'entraîne pas nécessairement un taux de chômage plus bas ou un niveau de salaire plus élevé pour les travailleurs. Selon les technologies, la relation entre l'intensité de la concurrence et le niveau de l'emploi (respectivement, salaire, bien‐être) n'est pas toujours monotone, et parfois a la forme d'un U inversé.

Suggested Citation

  • Zhiqi Chen & Bo Zhao, 2014. "Unemployment and product market competition in a Cournot model with efficiency wages," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(2), pages 555-579, May.
    • Handle: RePEc:wly:canjec:v:47:y:2014:i:2:p:555-579
    DOI: 10.1111/caje.12081
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    Cited by:

    1. de Pinto Marco & Goerke Laszlo, 2019. "Efficiency Wages in Cournot-Oligopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-13, October.
    2. Domenico Buccella & Luciano Fanti & Luca Gori, 2023. "Tax evasion in a Cournot duopoly with unions," Discussion Papers 2023/293, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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