This chapter examines a three-stage model where a state-owned firm and a
labour-managed firm can sequentially offer a wage-rise contract as a strategic device
before competing in quantities. The following three stages are considered. At stage one,
the state-owned firm chooses whether or not to offer a wage-rise contract. At stage two,
the labour-managed firm chooses whether or not to offer a wage-rise contract. At stage
three, the firms set their outputs simultaneously and independently. This chapter studies
the equilibrium outcome of the three-stage mixed market model.
Keywords: Cournot competition, labour-managed firm, mixed duopoly, perfectly
substitutable goods, profit per worker, state-owned firm, economic welfare,
subgame perfection, three-stage model, wage-rise contract.
