Abstract
A theoretical model of codetermination is considered, where consistent with German institutions, firm owners bargain with employees’ representatives about employment but not about wages. A duopoly and a more general oligopolistic situation are analyzed. For some range of bargaining power a prisoner’s dilemma exists. Codetermination leads to increased profits if the other firm is a traditional profit maximizer. Bargaining is the dominant strategy, although joint profits would be maximized with unrestricted profit-maximization. The theory is tested with data from 22 German firms, who operate in the same markets over 23 years. Codetermined firms actually show a different behavior than other companies.
Published Version
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