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Capacity Commitment Versus Flexibility: The Technological Choice Nexus in a Strategic Context

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  • BOYER, Marcel
  • MOREAUX, Michel

Abstract

This paper deals with the underlying factors explaining the stylized fact that Japan invests significantly more in flexible manufacturing technologies than the United States and Europe. We show how technological flexibility choices and equilibrium (both simultaneous and sequential) configurations in different industries depend on six industry characteristics and how changes in those characteristics are likely to affect the technological flexibility configuration observed. Low market volatility combined with intermediate market size will favor inflexible technologies; large values of either volatility or size will favor flexible and inflexible technologies. The possibility of a flexibility trap exists in industries characterized by low market volatility and intermediate market size. Finally, inflexible technologies can be part of an entry preventing strategy in some industries while flexible technologies can be in other industries. Nous considérons le fait stylisé voulant les investissements dans les technologies flexibles de production soient beaucoup plus importants au Japon qu'aux États-Unis et en Europe. Nous montrons comment les choix et équilibres de flexibilité (simultanés ou séquentiels) dépendent de six caractéristiques de l'industrie et comment ils sont susceptibles d'être affectés par des changements dans ces caractéristiques. Les industries de faible volatilité et de taille intermédiaire favorisent les technologies inflexibles; celles de volatilité ou de taille élevée favorisent les technologies flexibles; celles de volatilité et de taille faibles ou moyennes favorisent la coexistence de technologies flexibles et inflexibles. La possibilité d'une trappe de flexibilité existe lorsque la volatilité est faible et la taille est intermédiaire. Enfin, la flexibilité pourra servir de barrière à l'entrée dans certaines industries alors que l'inflexibilité le pourra dans d'autres industries.
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  • BOYER, Marcel & MOREAUX, Michel, 1995. "Capacity Commitment Versus Flexibility: The Technological Choice Nexus in a Strategic Context," Cahiers de recherche 9556, Universite de Montreal, Departement de sciences economiques.
    • Handle: RePEc:mtl:montde:9556
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    File URL: http://hdl.handle.net/1866/1998
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    References listed on IDEAS

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    1. Fine, Charles H. & Pappu, Suguna., 1990. "Flexible manufacturing technology and product-market competition," Working papers 3135-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. repec:adr:anecst:y:1989:i:15-16:p:13 is not listed on IDEAS
    3. Marcel Boyer & Michel Moreaux, 1989. "Uncertainty, Capacity and Flexibility: the Monopoly Case," Annals of Economics and Statistics, GENES, issue 15-16, pages 291-313.
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    Cited by:

    1. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May.
    2. Touhami, A. & Martens, A., 1996. "Macroemesures in Computable General Equilibrium Models: a Probabilistic Treatment with an Application to Morocco," Cahiers de recherche 9621, Universite de Montreal, Departement de sciences economiques.
    3. Marcel Boyer & Jacques Robert, 1996. "Ex Ante Incentives and Ex Post Flexibility," CIRANO Working Papers 96s-14, CIRANO.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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