Competition and Investment in Flexible Technologies

Lars-Hendrik Röller and Mihkel M. Tombak
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Lars-Hendrik Röller: European Institute of Business Administration (INSEAD), Boulevard de Constance, 77305 Fontainebleau Cedex, France
Mihkel M. Tombak: European Institute of Business Administration (INSEAD), Boulevard de Constance, 77305 Fontainebleau Cedex, France

Management Science, 1993, vol. 39, issue 1, 107-114

Abstract: This paper examines the implications of market structure on investment in flexible manufacturing systems (FMS). We analyze a two-stage game, in which firms choose between a flexible and a less flexible technology in the first stage, then choose production quantities in the second stage. In equilibrium, a large proportion of FMS firms is associated with more concentrated markets. Our model predicts that a larger market and/or a more differentiated product results in a higher proportion of FMS firms being sustained. These predictions are empirically supported using cross-section industry level data from both the US and Japan.

Keywords: flexible manufacturing systems (FMS); oligopolistic competition; product differentiation (search for similar items in EconPapers)
Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:39:y:1993:i:1:p:107-114

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