Lifetime Employment Contract and Quantity Competition with Profit-Maximizing and Joint-Stock Firms

This paper studies two-stage Cournot duopoly competition with a profit-maximizing firm and a joint-stock income-per-unit-of-capital-maximizing firm. In the first stage, each firm noncooperatively decides whether to offer lifetime employment as a strategic commitment. In the second stage, both firms noncooperatively choose actual outputs. The paper shows the equilibrium outcome of the mixed model and finds that the introduction of lifetime employment into the analysis of Cournot mixed competition is profitable only for the joint-stock firm. Furthermore, the paper examines interactions between an incumbent and a potential entrant as well as a pair of established firms. (JEL: C 72, D 21, L 20)