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Capacity Commitment versus Flexibility

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  • Marcel Boyer
  • Michel Moreaux

Abstract

We show how technological flexibility choices and equilibrium configurations (both simultaneous and sequential duopoly) depend on six industry characteristics. Low market volatility combined with intermediate market size favors inflexible technologies; large values of either volatility or size favor flexible technologies; low or intermediate values of both favor the coexistence of flexible and inflexible technologies. The possibility of a flexibility trap exists in industries of low volatility and intermediate size. Entry prevention can sometimes be achieved by inflexible technologies or flexible technologies, depending on the industry characteristics. Copyright (c) 1997 Massachusetts Institute of Technology.

Suggested Citation

  • Marcel Boyer & Michel Moreaux, 1997. "Capacity Commitment versus Flexibility," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 347-376, June.
  • Handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:347-376
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    Cited by:

    1. AMIR, Rabah & GARCIA, Filomena & KNAUFF, Malgorzata, 2006. "Endogenous heterogeneity in strategic models: symmetry-breaking via strategic substitutes and nonconcavities," CORE Discussion Papers 2006008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Boyer, M. & Jacques, A. & Moreaux, M., 1998. "Observability, Commitment and Flexibility," Papers 98.504, Toulouse - GREMAQ.
    3. repec:bla:stratm:v:38:y:2017:i:13:p:2555-2578 is not listed on IDEAS
    4. Gal-Or, Esther, 2002. "Flexible manufacturing systems and the internal structure of the firm," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1061-1096, October.
    5. Inderst, Roman & Wey, Christian, 2003. " Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 1-19, Spring.
    6. Boyer, Martin, 2014. "Directors’ and officers’ insurance and shareholder protection," Journal of Financial Perspectives, EY Global FS Institute, vol. 2(1), pages 107-128.
    7. Kwon, Chul-Woo, 2013. "An optimal production method for penetrating foreign markets: Standardization, localization, and flexible technology," Economic Modelling, Elsevier, vol. 33(C), pages 398-406.
    8. Krishnan S. Anand & Karan Girotra, 2007. "The Strategic Perils of Delayed Differentiation," Management Science, INFORMS, vol. 53(5), pages 697-712, May.
    9. Marcel Boyer & Armel Jacques & Michel Moreaux, 2002. "Observation, Flexibilité et Structures Technologiques des Industries," CIRANO Working Papers 2002s-12, CIRANO.
    10. Dewit, Gerda & Leahy, Dermot, 2006. "Investment timing under uncertainty in oligopoly: Symmetry or leadership?," Journal of Economics and Business, Elsevier, vol. 58(1), pages 1-19.
    11. Boyer, Marcel & Moreaux, Michel, 2000. "Flexibilité et stratégies d’impartition," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(2), pages 199-224, juin.
    12. Gerda Dewit & Dermot Leahy, 2001. "Fighting over Uncertain Demand: Investment Commitment versus Flexibility," Economics, Finance and Accounting Department Working Paper Series n1060201, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    13. Innes, Robert, 2008. "Entry for merger with flexible manufacturing: Implications for competition policy," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 266-287, January.
    14. Marcel Boyer & Armel Jacques & Michel Moreaux, 2001. "Bankruptcy Cost, Financial Structure and Technological Flexibility Choices," CIRANO Working Papers 2001s-27, CIRANO.
    15. Marcel Boyer, 1997. "L'économie des organisations : Mythes et réalités," CIRANO Working Papers 97s-02, CIRANO.
    16. Rodolphe Dos Santos Ferreira & Ehud Zuscovitch, 2010. "Jack of All Trades or Master of One? The Specialization–Flexibility Trade-off," Chapters,in: Innovation, Economic Growth and the Firm, chapter 7 Edward Elgar Publishing.
    17. Boyer, Marcel & Robert, Jacques, 2006. "Organizational inertia and dynamic incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 324-348, March.
    18. M. Martin Boyer, 2004. "Is the Demand for Corporate Insurance a Habit? Evidence of Organizational Inertia from Directors' and Officers' Insurance," CIRANO Working Papers 2004s-33, CIRANO.
    19. Marcel Boyer & Séverine Clamens, 1997. "Strategic Adoption of a New Technology under Uncertain Implementation," CIRANO Working Papers 97s-40, CIRANO.
    20. Boyer, Marcel, 1996. "L’économie des organisations," L'Actualité Economique, Société Canadienne de Science Economique, vol. 72(3), pages 247-274, septembre.
    21. Gerda Dewit & Dermot Leahy, 2002. "Time-to-build investment and uncertainty in oligopoly," Working Papers 200207, School of Economics, University College Dublin.

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