Production in advance versus production to order

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Abstract

We use a theoretical framework to compare production-in-advance type and production-to-order type environments. Carrying out our analysis in the framework of a symmetric capacity-constrained Bertrand-Edgeworth duopoly game, we prove that the equilibrium profits are the same in case of production in advance and production to order. In addition, advance production results in higher prices than production to order if both games have an equilibrium in nondegenerated mixed strategies. © 2004 Elsevier B.V. All rights reserved.

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Tasnádi, A. (2004). Production in advance versus production to order. Journal of Economic Behavior and Organization, 54(2), 191–294. https://doi.org/10.1016/j.jebo.2003.04.005

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