Capacity Commitment versus Flexibility

Marcel Boyer and Michel Moreaux

Journal of Economics & Management Strategy, 1997, vol. 6, issue 1, 347-376

Abstract: 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.

Date: 1997
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https://doi.org/10.1111/j.1430-9134.1997.00347.x

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Working Paper: Capacity Commitment versus Flexibility (1996)
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