Duality in an Industry with Fluctuating Demand
A perfect-competition model is developed to analyze duality in specialization and technology such as in the menâ€™s clothing industry, an industry with highly seasonal nature of the business cycle. We show that when the market fluctuation is large enough, some firms will specialize in one good with the advantage of static efficiency, while other firms will generalize in multi-variety production as a means of self- insurance. The specialized firms mainly satisfy the stable component of market demand, while the generalized firms satisfy only the variable components of demands. Relative to the specialized firms, the generalized firms have a smaller firm size and a lower degree of vertical division of labor within the firm, and use the technology with more flexible specialization but less capital-labor ratio.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Monash University, Victoria 3800, Australia|
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- Sheshinski, Eytan & Dreze, Jacques H, 1976. "Demand Fluctuations, Capacity Utilization, and Costs," American Economic Review, American Economic Association, vol. 66(5), pages 731-42, December.
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Oxford University Press, vol. 107(4), pages 1137-1160.
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- Mills, David E, 1984. "Demand Fluctuations and Endogenous Firm Flexibility," Journal of Industrial Economics, Wiley Blackwell, vol. 33(1), pages 55-71, September.
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