Earnings, Coalitions and the Stability of the Firm

Marini, Marco A. (1998): Earnings, Coalitions and the Stability of the Firm. Published in: Applied Mathematical Sciences , Vol. 139, No. 6 (2012): pp. 6943-6957.

Abstract

This paper presents an economy in which workers hired by a firm receive without cost a firm-specific training that enables them to potentially become independent producers. Thus, this specific training changes a worker's outside option according to the firm in which he works. Under such circumstances, by modelling explicitly the workers' decision to stay or to leave the firm, the paper determines a stable arning profile of the economy. Two main results are obtained by this approach. Firstly, that such a stable earning profile can allow for a vector of wages higher than the basic neoclassical wage and for wages differentials across industries even for initially homogenous workers; secondly, that an industry equilibrium wage depends upon the relative degree of competition existing therein. Both the results seem to match labour markets empirical evidence. Furthermore, a game-theoretic framework is introduced to characterize a stable earning profile as a particular case of core of an economy with coalitions of players behaving à la Nash in the product market.

• Item Type: MPRA Paper
• Language: English
• Keywords: Wage Negotiation, Oligopoly, Coalitions, Firm's Stability.
• Subjects: D - Microeconomics > D0 - General; D - Microeconomics > D2 - Production and Organizations; D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; D - Microeconomics > D4 - Market Structure, Pricing, and Design; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

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