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Technology choice and market structure : strategic aspects of flexible manufacturing

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  • NORMAN, George

    (Department of Economics, Tufts University, Medford, USA)

  • THISSE, Jacques-François

    ()
    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

This paper shows that the adoption of flexible manufacturing techniques by firms leads to a tougher price regime. This need not benefit consumers since the tougher regime deters entry and facilitates segmented market structures. The ability of flexible manufacturing to deter entry is moderated by two forces: non-prohibitive costs of re-anchoring flexible manufacturing processes and entrants choosing to produce niche products using designated technologies rather than to adopt flexible manufacturing. If flexible manufacturing leads to market preemption it can be expected to be characterized by excessive product variety. Alternatively, flexible manufacturers may prefer to accommodate entry by small-scale, niche firms.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1996059.

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Date of creation: 01 Nov 1996
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Handle: RePEc:cor:louvco:1996059

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  1. Macleod, W.B. & Norman, G. & Thisse, J.-F., . "Competition, tacit collusion and free entry," CORE Discussion Papers RP -736, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Norman, George & Thisse, Jacques-Francois, 1996. "Product Variety and Welfare under Tough and Soft Pricing Regimes," Economic Journal, Royal Economic Society, vol. 106(434), pages 76-91, January.
  3. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-37, March.
  4. 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.
  5. 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.
  6. McLEOD, W.B. & NORMAN, G. & THISSE, J.-F., . "Price discrimination and equilibrium in monopolistic competition," CORE Discussion Papers RP -828, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Lars-Hendrik Röller & Mihkel M. Tombak, 1993. "Competition and Investment in Flexible Technologies," Management Science, INFORMS, vol. 39(1), pages 107-114, January.
  8. Eaton, B Curtis & Schmitt, Nicolas, 1994. "Flexible Manufacturing and Market Structure," American Economic Review, American Economic Association, vol. 84(4), pages 875-88, September.
  9. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-34, June.
  10. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  11. 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.
  12. 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.
  13. 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.
  14. Donald Gerwin, 1993. "Manufacturing Flexibility: A Strategic Perspective," Management Science, INFORMS, vol. 39(4), pages 395-410, April.
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