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Strategic Choice of Manufacturing Flexibility in Intermediate Goods Markets

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Listed:
  • Joon Lim

    (Korea Information Society Development Institute)

Abstract

This paper examines the strategic choice of flexible versus dedicated manufacturing technologies in intermediate goods markets. We show that it may not be profitable for upstream firms to choose flexible technologies in a simple successive duopoly model. The reason is that the choice of flexible technologies reduces the profits from downstream captive firms. We find that downstream competition is an important factor affecting the choice of production technologies in the upstream market.

Suggested Citation

  • Joon Lim, 2009. "Strategic Choice of Manufacturing Flexibility in Intermediate Goods Markets," Korean Economic Review, Korean Economic Association, vol. 25, pages 91-104.
    • Handle: RePEc:kea:keappr:ker-20090630-25-1-04
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    File URL: http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-20090630-25-1-04.pdf
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    References listed on IDEAS

    as
    1. Norman, George, 2002. "The relative advantages of flexible versus designated manufacturing technologies," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 419-445, July.
    2. Tseng, Mei-Chiun, 2004. "Strategic choice of flexible manufacturing technologies," International Journal of Production Economics, Elsevier, vol. 91(3), pages 223-227, October.
    3. George Norman & Jacques‐François Thisse, 1999. "Technology Choice and Market Structure: strategic aspects of flexible manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 345-372, September.
    4. Lars-Hendrik Röller & Mihkel M. Tombak, 1993. "Competition and Investment in Flexible Technologies," Management Science, INFORMS, vol. 39(1), pages 107-114, January.
    5. Norman, George & Thisse, Jacques-Francois, 1999. "Technology Choice and Market Structure: Strategic Aspects of Flexible Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 345-372, September.
    6. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Flexible Manufacturing Systems; Intermediate Goods Markets;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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