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Technology Choice and Market Structure: Strategic Aspects of Flexible Manufacturing

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  • Norman, George
  • Thisse, Jacques-Francois

Abstract

This paper shows that the adoption of flexible manufacturing techniques by firms leads to a tougher price regime. However, consumers may not benefit since the tougher regime deters entry. Flexible manufacturing's ability to deter entry is moderated by two factors: non-prohibitive costs of re-anchoring flexible manufacturing processes and the possibility that entrants choose to produce niche products using designated technologies rather than adopt flexible manufacturing. Market preemption that deters entry will be characterized by excessive product variety. Alternatively, flexible manufacturers may prefer to accommodate entry by small-scale, niche firms. Moreover, ownership matters in determining equilibrium product configurations. Copyright 1999 by Blackwell Publishing Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 47 (1999)
Issue (Month): 3 (September)
Pages: 345-72

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Handle: RePEc:bla:jindec:v:47:y:1999:i:3:p:345-72

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  1. THISSE, Jacques-François & VIVES, Xavier, . "On the strategic choice of spatial price policy," CORE Discussion Papers RP -793, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  3. MACLEOD, W.B. & NORMAN, G. & THISSE, Jacques-François, . "Price discrimination and equilibrium in monopolistic competition," CORE Discussion Papers RP -1021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-34, June.
  5. Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
  6. B. Curtis Eaton & Myrna Holtz Wooders, 1985. "Sophisticated Entry in a Model of Spatial Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 282-297, Summer.
  7. Curtis Eaton, B. & Schmitt, N., 1991. "Flexible Manufacturing and Market Structure," Papers 1991-02, Tasmania - Department of Economics.
  8. MacLeod, W B & Norman, G & Thisse, J-F, 1987. "Competition, Tacit Collusion and Free Entry," Economic Journal, Royal Economic Society, vol. 97(385), pages 189-98, March.
  9. Donald Gerwin, 1993. "Manufacturing Flexibility: A Strategic Perspective," Management Science, INFORMS, vol. 39(4), pages 395-410, April.
  10. B. Curtis Eaton & Richard G. Lipsey, 1977. "A Comment on Location and Industrial Efficiency with Free Entry," Working Papers 269, Queen's University, Department of Economics.
  11. Norman, G. & Thisse, J.-F., . "Product variety and welfare under tough and soft pricing regimes," CORE Discussion Papers RP -1201, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. James D. Reitzes & David T. Levy, 1995. "Price Discrimination and Mergers," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 427-36, May.
  13. Chang, Myong-Hun, 1993. "Flexible Manufacturing, Uncertain Consumer Tastes, and Strategic Entry Deterrence," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 77-90, March.
  14. Lars-Hendrik Röller & Mihkel M. Tombak, 1993. "Competition and Investment in Flexible Technologies," Management Science, INFORMS, vol. 39(1), pages 107-114, January.
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