Inventory investment, product cycles, and the imperfectly competitive firm

We consider a profit-maximizing, imperfectly competitive firm, with downward-sloping demand functions, that can produce multiple products at a single facility. We show that if the firm dedicates production to a single product, both dynamic production, which exploits inventory, and static production, which does not, can be optimal. We also consider sharing the production facility by multiple products. We evaluate the efficiency of scheduling production using simple rotation cycle scheduling, and give a condition for guaranteeing optimality of this scheduling rule. We conclude by studying when dedicated production is preferred over shared production.