Nava Kahana

More on alternative objectives of labor-managed firms

Abstract This paper focuses on an alternative theory of a labor-managed firm where the main behavioral assumption is profit per laborer maximization subject to an employment constraint, or, alternatively, employment maximization subject to a profit per laborer constraint. This theory and its implications are derived employing a standard duality approach. The results are then compared with those obtained in the theory of the traditional labor-managed firm which maximizes profit per laborer.

The ratchet principle : A multi-period flexible incentive scheme

Abstract Using a two dimensional graphic model it is shown that the Soviet fixed incentive scheme does not function in a T-period model even under conditions of certainty. By allowing the incentive coefficient to change over time, the ratchet effect can be eliminated thereby inducing all the managers to work at full capacity.

Absenteeism: A comparison of incentives in alternative organizations

Abstract This paper uses a game-theoretic model to analyze the incentives workers may have to play “hookey” from work given that there is an outwardly unobservable probability of being sick and thus being unable to work. We compare incentives and equilibria in labor-managed firms (LMFs) and in profit-maximizing firms (PMFs), both in single-period and repeated games. We show, among other things, that in an egalitarian LMF there are circumstances under which members will not work when it is optimal to work, while the PMF suffers from the opposite problem; daily paid workers will work even when it would be better if they did not.

Monopoly, price discrimination, and rent-seeking

This paper considers the effect of rent-seeking on the welfare implications of price discrimination by a monopolist. It is shown that even when rent-seeking fully dissipates monopoly profits, it is possible for price discrimination to raise social welfare. Thus, the recognition that monopoly profits attract resource using, socially wasteful activities, does not necessarily negate price discrimination as a defence of monopoly.

Second-Degree Price Discrimination: A Graphical and Mathematical Approach

The authors use a relatively simple diagram accompanied by mathematical analysis to compare two pricing strategies: price-quantity packages and a two-part tariff. This is done both from the monopolists point of view and from the welfare point of view. The authors show that in the case of two consumer types, the price-quantity packages strategy dominates two-part tariff pricing from the monopolists point of view. However, social welfare may be higher under two-part tariff pricing.

Asymmetric taxation and the theory of the labor-managed firm

Abstract This note analyzes the implications of tax asymmetry for the theory of the revisited LMF, both in the short run and in the long run. It is shown that asymmetry in income taxation will not affect the LMFs short-run employment policy; however, it will affect long-run decisions, and may thereby affect short-run production. The LMFs behavior is then compared to that of its capitalistic twin.

On the responses of the Illyrian and entrepreneurial monopolies to a change in market conditions: An extension

Abstract This paper examines the responses of the Illyrian and entrepreneurial (ENT) monopolies to a shift in demand associated with a change in elasticity of demand. The results are utilized to demonstrate that the output effects of the labor-managed (LM) monopoly are quite different from that of the ENT monopoly under price discrimination. This latter result provides some important implications for output policy for the LM monopoly.

Foreign Aid and Illegal Immigration

Abstract Gaytán-Fregoso and Lahiri (2000) claim that foreign aid may increase the level of illegal immigration. This comment reconsiders their perverse findings under endogenous as well as exogenous income repatriation. Furthermore, modifying Gaytán-Fregoso and Lahiris model, in which aid is allotted in a lump-sum fashion, it is suggested that the actual amount of foreign aid should depend on the source countrys performance, i.e., on the number of illegal immigrants, since such a policy will further reduce the number of illegal immigrants.

The Ratchet principle: A diagrammatic interpretation

Abstract Using a two-period graphic model it is shown that the Soviet fixed incentive scheme does not function, even under conditions of certainty. Allowing the incentive coefficient to change over time will not necessarily induce the manager to work efficiently. Only when the target is feasible for both periods will a flexible incentive scheme function.

Private provision of a public good with time-allocation choice

When individuals with the same preferences but different abilities and non-labor incomes allocate time between leisure and labor and contribute to a pure public good, the order of the contributors’ equilibrium utilities in the Nash equilibrium is a perfect inversion of the order of their abilities, and the supply of the public good is not neutral to the ability distribution.