Why are idiosyncratic goods produced to order
Abstract We argue that goods are “idiosyncratic” when customer(s) face insignificant competition from excluded consumer(s); in which case the seller prefers producing to order to avoid sinking its production costs before bargaining begins. By contrast, the seller of a “standardised” good can exploit its outside option of selling to a rival consumer to raise the price agreed during bargaining, and can therefore produce such a good to stock. This argument explains the stylised facts on the order/stock distinction.