The name is absent

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~

Outside ownership

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

Agent:  employee E¹  employee E^rn  employee E^b  outside owner Oi customer Cij

share:  V^rl-V³     v^m - υ^b      0           V² - υ^m         v^b

„    .     . Agent: employee E² emplovee E^rn employee E^b outside owner O_i

if the firm hires Eⁱ : or

share: υ² — v^b v^m -v^b O           V² + v^b — v² — υ^m

if the firms hires E².

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

max (≥i [f (λ¹ log(l + fc_y)) + Λ² log(l + k_ij}] +          log(l + ⅛_y) - k_ij) (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 E^m employee E^b customer-owner C
share:    V¹ - V³ ' υ^m - υ^b         O         V² + v^b - v^m

29

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