Wage-Rise Contract and a Three-Stage Model with State-Owned and Labour-Managed Firms

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This chapter examines a three-stage model where a state-owned firm and a labour-managed firm can sequentially offer a wage-rise contract as a strategic device before competing in quantities. The following three stages are considered. At stage one, the state-owned firm chooses whether or not to offer a wage-rise contract. At stage two, the labour-managed firm chooses whether or not to offer a wage-rise contract. At stage three, the firms set their outputs simultaneously and independently. This chapter studies the equilibrium outcome of the three-stage mixed market model.