Competitive manufacturing with fluctuating demand and diverse technology: Mathematical proofs and illuminations on industry output-flexibility
I present an original model of competitive manufacturing with fluctuating demand and diverse technology with mathematical proofs. I discuss Aranoff's output-flexibility indicator, E(AC)-LRMC. I use the model to compute Aranoff's output-flexibility indicator to measure industry output-flexibility. I argue that a measure of industry output-flexibility is [beta]L(Q2 - Q1)/E(Q) I tie the demand-side discussion with the cost-side and show the degree of industry output-flexibility that will emerge under welfare and profit-maximizing pricing rules. I perform comparative statics of changes in technology, of demand, and of frequency of the high-peak state.
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- Massell, Benton F, 1969. "Price Stabilization and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 83(2), pages 284-98, May.
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