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Technology choice and market structure: strategic aspects of flexible manufacturing

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  • NORMAN, George
  • THISSE, Jacques-François

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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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1414.

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Handle: RePEc:cor:louvrp:-1414

Note: In : The Journal of Industrial Economics, 47(3), 345-372, 1999
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  1. Norman, George & Thisse, Jacques-Francois, 1996. "Product Variety and Welfare under Tough and Soft Pricing Regimes," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(434), pages 76-91, January.
  2. MacLeod, W.B. & Norman, G. & Thisse, J.-F., 1988. "Price discrimination and equilibrium in monopolistic competition," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 6(4), pages 429-446.
  3. Lars-Hendrik Röller & Mihkel M. Tombak, 1993. "Competition and Investment in Flexible Technologies," Management Science, INFORMS, INFORMS, vol. 39(1), pages 107-114, January.
  4. THISSE, Jacques-François & VIVES, Xavier, . "On the strategic choice of spatial price policy," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -793, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers, Queen's University, Department of Economics 519, Queen's University, Department of Economics.
  6. Curtis Eaton, B. & Schmitt, N., 1991. "Flexible Manufacturing and Market Structure," Papers, Tasmania - Department of Economics 1991-02, Tasmania - Department of Economics.
  7. 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.
  8. Macleod, W.B. & Norman, G. & Thisse, J.-F., . "Competition, tacit collusion and free entry," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -736, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Donald Gerwin, 1993. "Manufacturing Flexibility: A Strategic Perspective," Management Science, INFORMS, 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, Queen's University, Department of Economics 269, Queen's University, Department of Economics.
  11. Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
  12. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  13. Chang, Myong-Hun, 1993. "Flexible Manufacturing, Uncertain Consumer Tastes, and Strategic Entry Deterrence," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 41(1), pages 77-90, March.
  14. James D. Reitzes & David T. Levy, 1995. "Price Discrimination and Mergers," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 28(2), pages 427-36, May.
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