Buying Versus Hiring: An Indirect Evolutionary Approach

19 Pages Posted: 13 Oct 2009

See all articles by Siegfried Berninghaus

Siegfried Berninghaus

Institut fuer Statistik und Mathematische Wirtscha

Werner Guth

Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

On a symmetric homogeneous oligopoly market with stochastic demand, firms can either hire employees or buy their labor input on a competitive labor market. Whereas the wage of hired labor does not depend on the realization of stochastic demand, the price of ‘bought’ labor reacts positively to product demand. We derive the equilibrium price vector to define an evolutionary process, assuming that the number of hiring firms increases when they earn more than buying firms. We then derive and discuss the stationary distribution of this stochastic adaptation process.

Suggested Citation

Berninghaus, Siegfried and Güth, Werner, Buying Versus Hiring: An Indirect Evolutionary Approach. Metroeconomica, Vol. 60, Issue 4, pp. 619-637, November 2009. Available at SSRN: https://ssrn.com/abstract=1487305 or http://dx.doi.org/10.1111/j.1467-999X.2008.00358.x

Siegfried Berninghaus (Contact Author)

Institut fuer Statistik und Mathematische Wirtscha ( email )

Building 20.21
Universitaet Karlsruhe Gebaeude 20.21
76128 Karlsruhe
Germany

Werner Güth

Max Planck Institute of Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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