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Capacity Commitment versus Flexibility

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  • Marcel Boyer
  • Michel Moreaux

Abstract

We show how technological flexibility choices and equilibrium configurations (both simultaneous and sequential duopoly) depend on six industry characteristics. Low market volatility combined with intermediate market size favors inflexible technologies; large values of either volatility or size favor flexible technologies; low or intermediate values of both favor the coexistence of flexible and inflexible technologies. The possibility of a flexibility trap exists in industries of low volatility and intermediate size. Entry prevention can sometimes be achieved by inflexible technologies or flexible technologies, depending on the industry characteristics.

Suggested Citation

  • Marcel Boyer & Michel Moreaux, 1997. "Capacity Commitment versus Flexibility," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 347-376, June.
    • Handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:347-376
    DOI: 10.1111/j.1430-9134.1997.00347.x
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