Quantity Precommitment and Cournot and Bertrand Models with Complementary Goods

This paper investigates Cournot and Bertrand duopoly models with complementary goods, where firms can enter into lifetime employment contracts with their respective workers as a strategic device. The paper treatsthe following four cases: ‘Cournot competition with strategic complements’, ‘Cournot competition with strategic substitutes’, ‘Bertrand competition with strategic substitutes’ and ‘Bertrand competition with strategic complements’. The paper presents the equilibrium outcomes of the four cases. In addition, it is shown that lifetime employment is beneficial for firms in the cases with strategic complements.