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Technology Choice and Market Structure: strategic aspects of flexible manufacturing
Author(s) -
Norman George,
Thisse JacquesFrançois
Publication year - 1999
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00104
Subject(s) - industrial organization , business , preemption , variety (cybernetics) , product (mathematics) , economies of scale , barriers to entry , manufacturing , market structure , commerce , marketing , computer science , geometry , mathematics , artificial intelligence , operating system
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.