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Technology choice and market structure: strategic aspects of flexible manufacturing

  • NORMAN, George
  • THISSE, Jacques-François

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

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File URL: http://dx.doi.org/10.1111/1467-6451.00104
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1414.

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Handle: RePEc:cor:louvrp:-1414
Note: In : The Journal of Industrial Economics, 47(3), 345-372, 1999
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  1. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-34, June.
  2. Macleod, W.B. & Norman, G. & Thisse, J.-F., 1985. "Price discrimination and equilibrium in monopolistic competition," CORE Discussion Papers 1985006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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.
  4. Donald Gerwin, 1993. "Manufacturing Flexibility: A Strategic Perspective," Management Science, INFORMS, vol. 39(4), pages 395-410, April.
  5. 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.
  6. Curtis Eaton, B. & Schmitt, N., 1991. "Flexible Manufacturing and Market Structure," Papers 1991-02, Tasmania - Department of Economics.
  7. Macleod, W.B. & Norman, G. & Thisse, J.-F., . "Competition, tacit collusion and free entry," CORE Discussion Papers RP -736, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. 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.
  9. 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.
  10. Thisse, J.-F. & Vives, X., 1987. "On the strategic choice of spatial price policy," CORE Discussion Papers 1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Lars-Hendrik Röller & Mihkel M. Tombak, 1993. "Competition and Investment in Flexible Technologies," Management Science, INFORMS, vol. 39(1), pages 107-114, January.
  12. James D. Reitzes & David T. Levy, 1995. "Price Discrimination and Mergers," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 427-36, May.
  13. Eaton, B Curtis & Lipsey, Richard G, 1979. "A Comment on Location and Industrial Efficiency with Free Entry," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 447-50, August.
  14. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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