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Buying Versus Hiring - An Indirect Evolutionary Approach

Author

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  • Siegfried K. Berninghaus
  • Werner Güth

Abstract

On an otherwise symmetric oligopoly market with stochastic demands for heterogeneous products firms can either hire an employee or partner or buy the required labor input on the labor market. Whereas the wage of hired labor does not depend in the realization of stochastic demand, the price of bought labor input reacts positively to product demand. We first solve the market by deriving the equilibrium price vector. We then assume that the number of hiring firms will tend to increase when hiring firms make higher profits than non-hiring firms. We explicitly derive the stationary distribution of the thus defined stochastic adaptation process.

Suggested Citation

  • Siegfried K. Berninghaus & Werner Güth, 2002. "Buying Versus Hiring - An Indirect Evolutionary Approach," Papers on Strategic Interaction 2002-39, Max Planck Institute of Economics, Strategic Interaction Group.
    • Handle: RePEc:esi:discus:2002-39
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    References listed on IDEAS

    as
    1. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61(5), pages 434-434.
    2. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    3. repec:dau:papers:123456789/12331 is not listed on IDEAS
    4. Lewin, Peter & Phelan, Steven E, 2000. "An Austrian Theory of the Firm," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 13(1), pages 59-79, February.
    5. Siegfried Berninghaus & Werner Güth & Hartmut Kliemt, "undated". "From Teleology to Evolution Bridging the gap between rationality and adaptation in social explanation," Papers on Strategic Interaction 2002-24, Max Planck Institute of Economics, Strategic Interaction Group.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    (Indirect) evolution; asymmetric oligopoly; employment contracts; stochastic markets;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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