Are you being served? A general-equilibrium analysis of flexibility in production

In this paper firms may deviate from standard product specifications by inv esting in flexible production. In a two-sector general-equilibrium model th at features consumer preferences with a desire for customization and in whi ch the fixed cost of manufacturing production depend on the extent of flexi bility chosen, we find that flexibility in production increases aggregate w elfare. Moreover, we Find that the symmetric equilibrium with positive (exc ess) profits welfare dominates the equilibrium with zero profits.