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Technology Choice and Market Structure: Strategic Aspects of Flexible Manufacturing

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  • Norman, George
  • Thisse, Jacques-Francois

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

Suggested Citation

  • Norman, George & Thisse, Jacques-Francois, 1999. "Technology Choice and Market Structure: Strategic Aspects of Flexible Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 345-372, September.
  • Handle: RePEc:bla:jindec:v:47:y:1999:i:3:p:345-72
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    References listed on IDEAS

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    1. MacLeod, W.B. & Norman, G. & Thisse, J.-F., 1988. "Price discrimination and equilibrium in monopolistic competition," International Journal of Industrial Organization, Elsevier, vol. 6(4), pages 429-446.
    2. Eaton, B Curtis & Schmitt, Nicolas, 1994. "Flexible Manufacturing and Market Structure," American Economic Review, American Economic Association, vol. 84(4), pages 875-888, September.
    3. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-334, June.
    4. B. Curtis Eaton & Richard G. Lipsey, 1979. "A Comment on Location and Industrial Efficiency with Free Entry," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 447-450.
    5. MacLeod, W B & Norman, G & Thisse, J-F, 1987. "Competition, Tacit Collusion and Free Entry," Economic Journal, Royal Economic Society, vol. 97(385), pages 189-198, March.
    6. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    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. 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.
    9. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    10. 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.
    11. Donald Gerwin, 1993. "Manufacturing Flexibility: A Strategic Perspective," Management Science, INFORMS, vol. 39(4), pages 395-410, April.
    12. James D. Reitzes & David T. Levy, 1995. "Price Discrimination and Mergers," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 427-436, May.
    13. 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.
    14. 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.
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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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