A Two-production-period Model with State-owned and Labour-managed Firms

This paper considers a two-production-period model in which a state-owned firm competes against a labour-managed firm. In the first production period, the state-owned and labour-managed firms simultaneously and independently choose outputs. The chosen outputs become common knowledge and then, in the second production period, the firms simultaneously and independently choose outputs. After the second period outputs have been chosen, the market opens. The paper shows that there exists a subgame perfect Nash equilibrium that coincides with the Stackelberg outcome in which the labour-managed firm is the leader. Therefore, we find that in equilibrium the state-owned firm cannot play the role of the Stackelberg leader, whereas the labour-managed firm can.