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It follows from this and (5.2) that if the incumbent charged the unconstrained profit-maximizingprice a-1lw,, the unskilled wage would be wfm =(1 - a)a 2a/(1-a)A t(W/A t)-a/(l-a). Putting thisinto (5.1) yields the condition y< a-a. Treating (5.1) as an equality and solving it and (5.2)simultaneously for (wM, p,) yields Pt = yl/aW
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