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Capacity Commitment versus Flexibility


  • Boyer, Marcel
  • Moreaux, Michel


We show how technological flexibility choices and equilibrium configurations (both simultaneous and sequential duopoly) depend on six industry characteristics. Low market volatility combined with intermediate market size favors inflexible technologies; large values of either volatility or size favor flexible technologies; low or intermediate values of both favor the coexistence of flexible and inflexible technologies. The possibility of a flexibility trap exists in industries of low volatility and intermediate size. Entry prevention can sometimes be achieved by inflexible technologies or flexible technologies, depending on the industry characteristics. Copyright (c) 1997 Massachusetts Institute of Technology.
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  • Boyer, Marcel & Moreaux, Michel, 1996. "Capacity Commitment versus Flexibility," IDEI Working Papers 63, Institut d'Économie Industrielle (IDEI), Toulouse.
  • Handle: RePEc:ide:wpaper:723

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    References listed on IDEAS

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    8. David Martimort, 1996. "Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 1-19, Spring.
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    11. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    12. repec:adr:anecst:y:1992:i:28:p:01 is not listed on IDEAS
    13. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
    14. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
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    Cited by:

    1. AMIR, Rabah & GARCIA, Filomena & KNAUFF, Malgorzata, 2006. "Endogenous heterogeneity in strategic models: symmetry-breaking via strategic substitutes and nonconcavities," CORE Discussion Papers 2006008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. repec:bla:stratm:v:38:y:2017:i:13:p:2555-2578 is not listed on IDEAS
    3. Gal-Or, Esther, 2002. "Flexible manufacturing systems and the internal structure of the firm," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1061-1096, October.
    4. Krishnan S. Anand & Karan Girotra, 2007. "The Strategic Perils of Delayed Differentiation," Management Science, INFORMS, vol. 53(5), pages 697-712, May.
    5. Dewit, Gerda & Leahy, Dermot, 2006. "Investment timing under uncertainty in oligopoly: Symmetry or leadership?," Journal of Economics and Business, Elsevier, vol. 58(1), pages 1-19.
    6. Gerda Dewit & Dermot Leahy, 2001. "Fighting over Uncertain Demand: Investment Commitment versus Flexibility," Economics, Finance and Accounting Department Working Paper Series n1060201, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    7. Marcel Boyer & Armel Jacques & Michel Moreaux, 1998. "Observability, Commitment and Flexibility," CIRANO Working Papers 98s-36, CIRANO.
    8. Rodolphe Dos Santos Ferreira & Ehud Zuscovitch, 2010. "Jack of All Trades or Master of One? The Specialization–Flexibility Trade-off," Chapters,in: Innovation, Economic Growth and the Firm, chapter 7 Edward Elgar Publishing.
    9. Inderst, Roman & Wey, Christian, 2003. " Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 1-19, Spring.
    10. Boyer, Marcel & Robert, Jacques, 2006. "Organizational inertia and dynamic incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 324-348, March.
    11. M. Martin Boyer, 2004. "Is the Demand for Corporate Insurance a Habit? Evidence of Organizational Inertia from Directors' and Officers' Insurance," CIRANO Working Papers 2004s-33, CIRANO.
    12. Boyer, Martin, 2014. "Directors’ and officers’ insurance and shareholder protection," Journal of Financial Perspectives, EY Global FS Institute, vol. 2(1), pages 107-128.
    13. Marcel Boyer & Séverine Clamens, 1997. "Strategic Adoption of a New Technology under Uncertain Implementation," CIRANO Working Papers 97s-40, CIRANO.
    14. Boyer, Marcel, 1996. "L’économie des organisations," L'Actualité Economique, Société Canadienne de Science Economique, vol. 72(3), pages 247-274, septembre.
    15. Kwon, Chul-Woo, 2013. "An optimal production method for penetrating foreign markets: Standardization, localization, and flexible technology," Economic Modelling, Elsevier, vol. 33(C), pages 398-406.
    16. Boyer, Marcel & Moreaux, Michel, 2000. "Flexibilité et stratégies d’impartition," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(2), pages 199-224, juin.
    17. Innes, Robert, 2008. "Entry for merger with flexible manufacturing: Implications for competition policy," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 266-287, January.
    18. Marcel Boyer & Armel Jacques & Michel Moreaux, 2001. "Bankruptcy Cost, Financial Structure and Technological Flexibility Choices," CIRANO Working Papers 2001s-27, CIRANO.
    19. Marcel Boyer & Armel Jacques & Michel Moreaux, 2002. "Observation, Flexibilité et Structures Technologiques des Industries," CIRANO Working Papers 2002s-12, CIRANO.
    20. Marcel Boyer, 1997. "L'économie des organisations : Mythes et réalités," CIRANO Working Papers 97s-02, CIRANO.
    21. Gerda Dewit & Dermot Leahy, 2002. "Time-to-build investment and uncertainty in oligopoly," Working Papers 200207, School of Economics, University College Dublin.

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