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Cost Flexibility and Price Dispersion

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  • Hiebert, L Dean

Abstract

This paper examines the relationship between a firm's cost flexibility and product price dispersion. The author shows that a mean-preserving increase in demand variability need not lead to an increase in the value of flexibility or in the optimal level of flexibility. This is contrary to results in the literature that are achieved by assuming a quadratic cost curve. Copyright 1989 by Blackwell Publishing Ltd.

Suggested Citation

  • Hiebert, L Dean, 1989. "Cost Flexibility and Price Dispersion," Journal of Industrial Economics, Wiley Blackwell, vol. 38(1), pages 103-109, September.
  • Handle: RePEc:bla:jindec:v:38:y:1989:i:1:p:103-09
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    Cited by:

    1. Yang, Liu & Wang, Yonggui & Ma, Jun & Ng, Chi To & Cheng, T.C.E., 2014. "Technology investment under flexible capacity strategy with demand uncertainty," International Journal of Production Economics, Elsevier, vol. 154(C), pages 190-197.
    2. Aranoff, Gerald, 2011. "Competitive manufacturing with fluctuating demand and diverse technology: Mathematical proofs and illuminations on industry output-flexibility," Economic Modelling, Elsevier, vol. 28(3), pages 1441-1450, May.
    3. Elisabetta Magnani & David Prentice, 2000. "Unionisation, short-run flexibility and cost efficiency: Evidence from U.S. manufacturing," Working Papers 2000.04, School of Economics, La Trobe University.

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