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Competitive manufacturing with fluctuating demand and diverse technology: Mathematical proofs and illuminations on industry output-flexibility

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  • Aranoff, Gerald

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1441-1450
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    References listed on IDEAS

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    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
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    6. Hiebert, L Dean, 1989. "Cost Flexibility and Price Dispersion," Journal of Industrial Economics, Wiley Blackwell, vol. 38(1), pages 103-109, September.
    7. Aranoff, Gerald, 1989. "Output-Flexibility and Diverse Technology," Scottish Journal of Political Economy, Scottish Economic Society, vol. 36(2), pages 141-159, May.
    8. Turnovsky, Stephen J, 1973. "Production Flexibility, Price Uncertainty and the Behavior of the Competitive Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 395-413, June.
    9. Paul A. Samuelson, 1972. "Rejoinder," The Quarterly Journal of Economics, Oxford University Press, vol. 86(3), pages 500-503.
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