This chapter examines a two-stage game model of duopoly between a labormanaged
firm and a joint-stock firm. The following situation is considered. In stage one,
each firm independently decides whether or not to offer lifetime employment. In stage
two, each firm independently chooses its actual output. The chapter shows that only the
labor-managed firm offers lifetime employment and at equilibrium both firms are more
profitable than in the simultaneous quantity-setting game without lifetime employment.
Keywords: Fixed cost, Joint-stock firm, Labor-managed firm, Lifetime employment,
Mixed duopoly, Strategic commitment, Subgame perfection, Sunk cost, Variable cost.
