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| Author: | Ungern-Sternberg, T von |
| Title: | The flexibility to switch between different products |
| Journal: | Economica
1990 : AUG, VOL. 57:227, p.355-370 |
| Index terms: | CONSUMER DEMAND DIVERSIFICATION PRODUCTS FLEXIBILITY TECHNOLOGY SPECIALIZATION |
| Language: | eng |
| Abstract: | Firms try to insure themselves against demand fluctuations by diversifying into different products, i.e. by switching their production capacities to another product, when demand for one product is low. The use of flexible equipment implies higher cost for the production of one good, but makes it less costly to switch the production to another. The market will usually be characterized by the coexistence of variety of firms, some using high-cost flexible technologies, others low-cost dedicated production units. This heterogenity of firms is due to the fact that the choice between specialization and flexibility involves a fundamental non-convexity. In the study a standard model of a perfectly competitive industry was used. |
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