Strategic Choice of Flexible Production Technologies and Welfare Implications

Lars-Hendrik Roller and Mihkel M Tombak

Journal of Industrial Economics, 1990, vol. 38, issue 4, 417-31

Abstract: This paper examines the market conditions under which firms would choose a more flexible production technology with respect to product design. The authors use a two-stage game in which firms choose between flexible and less flexible production technologies in the first stage and subsequently choose output. They find that consumers would benefit from the introductions of flexible production technologies. In their model, the authors' also find that the production technology game is a prisoner's dilemma when firms invest in flexible manufacturing systems. They derive the conditions under which the resulting equilibria are efficient. Copyright 1990 by Blackwell Publishing Ltd.

Date: 1990
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