Abstract
According to Eaton and Schmitt (1994), the essence of flexible manufacturing is scope economies in the production of differentiated goods.1 Eaton and Schmitt introduce scope economies as a device for a basic product to be modified to produce differentiated variants. They argue that firms can develop the ability to produce a basic product while incurring a sunk cost of product development. This basic product can be further modified to produce differentiated variants, albeit with an extra switching cost.
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© 2012 Wen-Jung Liang and Chao-Cheng Mai
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Liang, WJ., Mai, CC. (2012). Subcontracting or Exporting with Flexible Manufacturing. In: Kemp, M.C., Nakagawa, H., Uchida, T. (eds) Positive and Normative Analysis in International Economics. Palgrave Macmillan, London. https://doi.org/10.1057/9780230348202_9
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DOI: https://doi.org/10.1057/9780230348202_9
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