The Korean Economic Review
Strategic Choice of Manufacturing Flexibility in Intermediate Goods Markets
Joon Lim Year 2009Vol. 25No. 1
This paper examines the strategic choice of flexible versus dedicated manufacturing technologies in intermediate goods markets. We show that it may not be profitable for upstream firms to choose flexible technologies in a simple successive duopoly model. The reason is that the choice of flexible technologies reduces the profits from downstream captive firms. We find that downstream competition is an important factor affecting the choice of production technologies in the upstream market.