Price uncertainty and the labor managed firm: reply.

• Author: Choi, E. Kwan
• Position: Response to article by N. Kahana and J. Paroush in this issue, p. 774

In most market economies, the entrepreneurs and competitive firms are risk takers. In these markets, workers generally receive a fixed wage while the entrepreneurs assume all the risk. In contrast, workers in labor managed firms assume all the risk originating in the market. Obviously, a hybrid firm in which workers share some risk with the entrepreneur would dominate either the competitive or the labor managed firm, but this hybrid firm is not popular, at least not in developed countries. Moreover, many collective farms and cooperatives in the former Soviet Union and other formerly planned economies are undergoing structural changes to adjust to market economies, and must make choices about what type of firms to establish. For these reasons, the theory of labor managed firms is extremely important and relevant. Accordingly, the performances of these various types of firms deserve careful analyses.

Although some research papers are cited more often than others, it is said that a typical paper is read by approximately three other researchers, excluding the editor and the referees. We were naturally pleased when Haruna [2] was able to sharpen our results in Choi and Feinerman [1]. While we were serving as referees for other journals, we also found that another paper cited our work. Taken with Kahana and Paroush's comment, this indicates that to date a total of four researchers have cited our work, which would definitely put our paper above the average readership. Moreover, while citations do not necessarily imply that the citing authors have read the papers closely, we were extremely pleased to learn that Kahana and Paroush have read our paper carefully enough to find some errors in the calculations.

The purpose of Kahana and Paroush's comment is twofold. First, it points out two mistakes in our earlier paper, Choi and Feinerman [1]. Second, it claims that all our results, as well as those of Haruna [2], are either identical to those of Kahana and Paroush [3], or they can be obtained as special cases. We will address these two points in order.

1. Kahana and Paroush are correct that there is an error in our Proposition 1(ii) [1, 49], which summarizes the analysis in the preceding two paragraphs. This is essentially a typographical error that can be corrected either by changing the inequality {[Q.sup.a] - [Q.sup.n] [greater than] 0} to {[Q.sup.a] - [Q.sup.n] [less than] 0}, or by substituting L with K, as suggested by Kahana and Paroush.

   Kahana...