Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202697 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12351
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises.
Subjects: 
oligopoly
efficiency wages
excessive entry
welfare
JEL: 
D43
J31
L13
Document Type: 
Working Paper

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