Buying Versus Hiring – An Indirect Evolutionary Approach –

On an otherwise symmetric oligopoly market with stochastic demands for heterogeneous products firms can either hire an employee or partner or buy the required labor input on the labor market. Whereas the wage of hired labor does not depend on the realization of stochastic demand, the price of bought labor input reacts positively to product demand. We first solve the market by deriving the equilibrium price vector. We then assume that the number of hiring firms will tend to increase when hiring firms make higher profits than non-hiring firms. We explicitly derive the stationary distribution of the thus defined stochastic adaptation process. JEL CLASSIFICATION: C72, D43