Abstract
The standard one-period model of an industry populated by one large firm and a fringe of small competitors is used to show that the traditional focus on dominant firm pricing strategies is too narrow. In an era of industry-wide wage-setting or spillover effects, the dominant firm may also improve its position through generous wage contracts that spread to its competitors and raise their costs. Some general observations are made about the model’s applicability and its possible extension to oligopoly theory and stagflation.
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