Why Labor-Managed Firms May Not Be Socially Desirable
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ABSTRACT:- We employ a game-theoretic model to analyze five duopoly regimes: (1) state-owned and labor-managed firms, (2) labor-managed firms, (3) state-owned and capitalist firms, (4) capitalist firms, and (5) capitalist and labor-managed firms. We compare welfare outcomes across these regimes and find that labor-managed firms may not be socially desirable because of their adverse impact on economic welfare. This may help explain why labor-managed firms are relatively rare compared to capitalist firms.
Keywords: Capitalist firm; Cournot model; Economic welfare; Labor-managed firms; State-owned firm
JEL Classification Numbers: C72, D21, L32