Corporate Social Responsibility and Reaction Functions of Labor-Managed Firms with Lifetime Employment as Strategic Commitment

Abstract

This paper examines an oligopoly game model with a concave demand function where labor-managed firms compete in quantities with each other. There is no possibility of entry or exit. The timing of the game is as follows. In the first stage, each labor-managed firm simultaneously and independently chooses the level of social concern. In the second stage, each labor-managed firm simultaneously and independently chooses whether to offer lifetime employment as a strategic commitment device. In the third stage, quantity competition takes place. This paper examines the reaction functions of labor-managed firms in the model. First, the paper presents the reaction functions of labor-managed firms in the game model. It is shown that the reaction functions of labor-managed firms have both upward and downward sloping cases. Next, the paper provides a simple example to support the above result. This example shows a case in which the reaction functions of labor-managed firms are downward-sloping.

Keywords

• corporate social responsibility
• cournot model
• labor-managed firms
• lifetime employment
• reaction functions