Bertrand games with lifetime employment contracts as a strategic commitment

Abstract

This paper considers lifetime employment contracts as a strategic commitment and discusses the respective equilibrium outcomes of the two cases of a price-setting game with substitute goods and a price-setting game with complementary goods. As a result, it is shown that in each case, the equilibrium coincides with the Bertrand solution with no life-time employment. © 2006 Blackwell Publishing Ltd and the University of Manchester.