Abstract: As the main body of entrepreneurial activities, startups face larger demand uncertainty and market competition, and thus need to undertake greater bankruptcy risk. They concern more about survival rather than growth during the operations. Volume flexible technology choice is one of the most important operational decisions of startups, which can help them to reduce the mismatch between supply and demand, and enhance their competitiveness. It also has a higher capacity cost, which leads to a higher investment cost and bankruptcy risk. So, the startups need to weigh the advantages against the disadvantages of volume flexibility. In this paper, the volume flexible technology decision of the startup is analyzed under competitive setting. Using the game theory the model in which a startup company and an established firm engage in output competition in the market is first built. Both of them can choose volume flexible technology or traditional technology. The startup company maximize its survival probability while the established firm maximizes its profit. Then it obtains the optimal capacity investment decisions of the 2 firms, the optimal survival probability of the startup, and the optimal profit of the established firm under different competitive strategies. Nash equilibrium is used to obtain the equilibrium technology choice of the 2 firms. Finally, it conducts a numerical experimentation to analyze the factors that influence the equilibrium strategies of the two firms. The result shows that under competitive setting, the startup company pays more attention to the cost factor, is more likely to choose non-flexible technology, which has a lower cost than the volume flexible technology. However, the established firm is more sensitive to the demand variance, will choose volume flexible technology when the demand variance is high. As the frictional cost of the volume flexible technology increase, both of them prefer non-flexible technology.

Key words: volume flexible technology, competition, startup, Nash-equilibrium