Does Consumption Make Firms More Flexible?: A Study of Limited Managerial Cognition
1993 (English)Report (Other academic)
A model of procedural decision making in firms is combined with an oligopoly model to study the effect of limited managerial cognition on firm flexibility. It is argued that a firm may vary its flexibility, and hence that there exists a tradeoff between decision making costs and costs due to imperfect adjustment to the environment. The main conclusions are that (1) the level of flexibility chosen by firms tends to be too low, from a social welfare point of view; and (2) increased competition tends to reduce flexibility in an individual firm. Aggregated flexibility in the market may, however, increase in which case consumers are unambigously better off.
Place, publisher, year, edition, pages
Stockholm: IIES , 1993. , 34 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 544
IdentifiersURN: urn:nbn:se:su:diva-41863OAI: oai:DiVA.org:su-41863DiVA: diva2:338036