Competitive manufacturing with fluctuating demand and diverse technology: Mathematical proofs and illuminations on industry output-flexibility

Gerald Aranoff

Economic Modelling, 2011, vol. 28, issue 3, 1441-1450

Abstract: I present an original model of competitive manufacturing with fluctuating demand and diverse technology with mathematical proofs. I discuss Aranoff's output-flexibility indicator, E(AC)-LRMC. I use the model to compute Aranoff's output-flexibility indicator to measure industry output-flexibility. I argue that a measure of industry output-flexibility is [beta]L(Q2 - Q1)/E(Q) I tie the demand-side discussion with the cost-side and show the degree of industry output-flexibility that will emerge under welfare and profit-maximizing pricing rules. I perform comparative statics of changes in technology, of demand, and of frequency of the high-peak state.

Keywords: Capacity; planning; and; investment; Game; theory; Demand; fluctuations; Output; flexibility; Equilibrium; Technology; choice; Cost; curves; Competitive; manufacturing; Marginal; cost; pricing; Short-run; average; cost; curve (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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