Abstract
Chapter 1 provides a model that firms not only choose mode of organization but also deals with agency problem and the competitive equilibrium in labor market. Firm's choice of the mode of organization is defined by his ability to acquire the information of worker's productivity. Also, firm fires the failed worker according to that information and the benefit and cost of rehiring a new worker from the market. Under certain conditions, an asymmetric equilibrium exists where some firms use outsourcing and the others use integration. The mixed mode in equilibrium explains the phenomenon that firms choose different modes of organizations in a symmetric setting. Furthermore, comparative statics shows that the mixed equilibrium is increasing in revenue of project at the first period and the number of worker and decreasing in the revenue of project at the second period. We also compare the equilibrium result to the solutions to the social planner and cartel optimization and demonstrate a general over-outsourcing pattern. In chapter 2, we construct a model that firms compete as Bertrand but they provide their products in advance. In the model, the firm's cost is privately known. We show that if firms are unable to observe the quantities the other firms made when they are setting price, low-cost firms will price more aggressively and high-cost firms will price higher than the firms in the market that production after naming the price. Moreover, a market with more elastic demand amplify this effect. When the firms can observe the quantities their rivals made, the outcome is changed dramatically. The market equilibrium will be consistent with the Cournot outcome, though firms compete for market share in Bertrand game. This is a similar result to Kreps and Scheinkman (1983) and Leopore (2008). The difference between our model and theirs is the rationing rule for pricing competition. In the literature, they construct a complex rationing rule to deal with the problem of residual demand. Here, we use the winner-take-all rule to simplify the model and provide a Cournot outcome in the Bertrand game settings with rival's cost unknown.