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.

The geometry of a two-good partial-equilibrium model with economies of scope is presented. There are three types of firms: diversified firms that produce both goods and two types of specialized firms. Thus, there are five possible industry market structures: one involving all three types of firms, three involving two types of firms, and one involving only diversified firms. We show that the equilibrium market structure is jointly determined by supply (cost) and demand conditions and that any market structure involving more types of firms than goods is an unlikely occurrence.

A three-sector general equilibrium model is employed to analyze the consequences of changes in aggregate demand, union power, workers' time horizons, and labor force size on "unionized" industries, industries with competitive labor markets,and unemployment. Workers are "voluntarily" unemployed while searching for jobs,attempting to arbitrage a wage gap created by partial "unionization." Many reduced-form elasticities are ambiguous in algebraic sign. For example, decreased aggregate demand may increase employment in industries with competitive labor markets. However, a larger and younger work force with enhanced aspirations for higher-paying jobs will have unambiguously higher unemployment.

B. Curtis Eaton, Richard G. Lipsey; The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition12, The Rev

B. Curtis Eaton, Richard G. Lipsey; A Comment on Location and Industrial Efficiency with Free Entry, The Quarterly Journal of Economics, Volume 93, Issue 3