Lifetime Employment and a Three-Stage Model with State-Owned and Joint-Stock Firms

Abstract

This chapter investigates a mixed duopoly model where a joint-stock firm and a state-owned firm are allowed to offer lifetime employment as a strategic commitment. The chapter considers the following situation. First, the state-owned firm chooses whether to provide lifetime employment or not. Second, the joint-stock firm chooses whether to provide lifetime employment or not. Third, each firm sets its actual quantity simultaneously and independently. The chapter presents the equilibrium solution of the mixed market model. As a result of this, it is suggested that introducing lifetime employment into the model of quantity-setting mixed duopoly is beneficial for the state-owned firm.

Keywords: Cournot competition, income per capital, joint-stock firm, lifetime employment, mixed duopoly, perfectly substitutable goods, economic welfare, state-owned firm, strategic commitment, three-stage model.