Intra-Labour Strategic Commitment

This thesis explores a strategic investment motive for the choice of skilled labour (management). Using the case study of department store competition, we argue that management is an observable and irreversible input. This allows firms to use it to obtain a first-mover advantage in oligopolistic interactions. We find that, given complementarities of labour inputs, firms will hire excess management relative to the cost-minimising input bundle. This idea is first illustrated with a simple two-stage example. We then show that over-management also holds in a more realistic setting with  infinitely-lived firms facing finite adjustment costs.