FLEXIBLE MANUFACTURING AND MARKET-STRUCTURE

In this paper we investigate the implications of flexible manufacturing for market structure. In the received theory of market structure, based largely on inflexible techniques of production, a number of well-known forces work to limit concentration. In our model none of these forces exists. Hence, we conclude that flexible manufacturing promotes concentration through preemption and mergers, or equivalently through cartels. Interestingly, the concentrated market structures associated with flexibility may or may not be welfare-dominated by a regime in which monopolization is not allowed.