The Labour-Managed Firm in Monopolistic Competition

The purpose of this paper to identify and evaluate the welfare consequences of differences in the size distribution of firms in the imperfectly competitive market equilibria of comparable industries whose firms are organized along labour-managed and entrepreneurial (profit-maximizing) lines, respectively. In zero-profit market equilibria the two forms of organization yield the same outcome. Where product differentiation or cost asymmetries allow positive equilibrium profits to be earned, however, we expect the two industry structures to differ. Firms that are profitable will produce less output in a labour-managed than in an entrepreneurial system, thereby raising prices and allowing new entry. This suggests a labour-managed industry structure that, relative to the entrepreneurial structure, involves a larger number of firms, each producing a lower level of output (Meade, 1972; Vanek, 1970). This paper examines these conjectures in the context of a specific model of monopolistic competition. The welfare performance of these equilibrium industry structures is then compared, and specific examples in which the labour-managed structure is socially preferred are given

Competition (biology) · Economics · Free entry · Incentive · Industrial organization · Labour economics · Market economy · Market structure · Microeconomics · Monopolistic competition · Monopoly · Perfect competition · Product market · Profit (economics) · Welfare · Yield (engineering) · Cooperative Studies and Economics · Merger and Competition Analysis · Taxation and Compliance Studies

• The general theory of labor-managed market economies.

  Jaroslav Vanek•The general theory of labor-managed…•1970

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• Labour-Managed Firms in Conditions of Imperfect Competition

  J E Meade•The Economic Journal•1974

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