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Technology Choice and Market Structure: Strategic Aspects of Flexible Manufacturing

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  • George Norman

    ()

  • Jacques-François Thisse

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

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 9808.

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Date of creation: 1998
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Handle: RePEc:tuf:tuftec:9808

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  1. Donald Gerwin, 1993. "Manufacturing Flexibility: A Strategic Perspective," Management Science, INFORMS, vol. 39(4), pages 395-410, April.
  2. Macleod, W.B. & Norman, G. & Thisse, J.-F., 1985. "Price discrimination and equilibrium in monopolistic competition," CORE Discussion Papers 1985006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Eaton, B Curtis & Lipsey, Richard G, 1979. "A Comment on Location and Industrial Efficiency with Free Entry," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 447-50, August.
  4. 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).
  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. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers 519, Queen's University, Department of Economics.
  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. 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.
  9. Eaton, B Curtis & Schmitt, Nicolas, 1994. "Flexible Manufacturing and Market Structure," American Economic Review, American Economic Association, vol. 84(4), pages 875-88, September.
  10. 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.
  11. 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.
  12. 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.
  13. Thisse, J.-F. & Vives, X., 1987. "On the strategic choice of spatial price policy," CORE Discussion Papers 1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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