The name is absent



max <
⅛<j>o


⅛- [f1 log(l + ⅛υ∙)) + μ2 log(l + kij)]
+⅛i [(ʃ'ʌ"1 - ʌ6) ɪθsd + ⅛∙)] - 4


(17)


We therefore obtain the following solution for the investment choices under employee
cooperative.

Lemma 14 If f' > 1, the equilibrium human capital investment levels under employee
cooperative are given by:

.Ec _ an ff ∖i , ʌ" I ɪ " ɑo
i> - ~2^ [ʃ ʌ + Tj + ~6~

(∕zλm + λ6) - 1.


Outside ownership

When f, 1 the bargaining solution under outside ownership is given by:

Agent:  employee E1  employee Ern  employee Eb  outside owner Oi customer Cij

share:  Vrl-V3     vm - υb      0           V2 - υm         vb

„    .     . Agent: employee E2 emplovee Ern employee Eb outside owner Oi

customer C

υb


if the firm hires Ei : or

share: υ2 — vb vm -vb O           V2 + vb — v2 — υm

if the firms hires E2.

These payoffs then translate into the following ex-ante investment choices for the em-
ployees. When
ff > 1 theʌ* choose klj to maximize:

max (≥i [f1 log(l + fcy)) + Λ2 log(l + kij}] +          log(l + ⅛y) - kij) (18)

⅛tj I ⅛                                                               â                                  J

We thus obtain the following solution for the investment choices under outside owner-
ship.

Lemma 15 The equilibrium human capital investment levels under outside ownership are
given by

k° = ɪ √'λ' + < +         - 1∙ iff' ≥ 1∙

That is. when the complementarity is strong, the outside ownership will under-invest.

Customer Cooperative

Wlien ∕' ≥ 1 we have:

Agent: employee F1 employee Em employee Eb customer-owner C
share:    V1 - V3 ' υm - υb         O         V2 + vb - vm

29



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