Lifetime Employment and Stackelberg Mixed Duopoly Games with a Foreign Labour-Managed Competitor

Abstract

This article considers two Stackelberg games in which a state-owned firm competes against a foreign labour-managed firm. The first game is as follows. In the first stage, the state-owned firm decides whether to offer lifetime employment as a strategic commitment device. In the second stage, the foreign labour-managed firm decides whether to offer lifetime employment as a strategic commitment device. In the third stage, both firms simultaneously and independently choose actual outputs. The structure of the second game is nearly identical and differs only in the order in which the firms decide on the offer of lifetime employment in the first two stages. This study presents the equilibrium outcomes of these two Stackelberg games.