Flexible Manufacturing and Market Structure

B. Eaton () and Nicolas Schmitt

American Economic Review, 1994, vol. 84, issue 4, 875-88

Abstract: In this paper, the authors investigate the implications of flexible manufacturing for market structure. In the received theory of market structure, based largely on inflexible techniques of production, a number of well-known forces work to limit concentration. In the authors' model, none of these forces exists. Hence, they conclude that flexible manufacturing promotes concentration through preemption and mergers, or equivalently through cartels. Interestingly, the concentrated market structures associated with flexibility may or may not be welfare-dominated by a regime in which monopolization is not allowed. Copyright 1994 by American Economic Association.

Date: 1994
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