Lifetime employment and reaction functions of socially concerned firms under quantity competition

This paper considers a Cournot oligopoly game model with a concave demand function where socially concerned firms compete with each other. Each socially concerned firm maximizes its own profit plus a share of consumer surplus. The timing of the game is as follows. In the first stage, each socially concerned firm simultaneously and non-cooperatively chooses whether to offer lifetime employment as a strategic commitment device. If a firm offers lifetime employment, then it chooses an output level, employs the necessary number of employees to produce the output level chosen, and enters into a lifetime employment contract with all of the employees. In the second stage, each socially concerned firm simultaneously and non-cooperatively chooses its actual output. The paper presents the reaction functions of socially concerned firms in the Cournot oligopoly model. As a result of this analysis, the paper shows that the Cournot reaction functions of socially concerned firms may be upward-sloping.