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The value of firm flexibility under extreme positive demand shocks: COVID-19 and toilet paper panic purchases

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  • Koppenberg, Maximilian
  • Mishra, Ashok K.
  • Dalhaus, Tobias
  • Hirsch, Stefan

Abstract

We estimate the relationship between firms’ production flexibility and profitability under extreme positive demand shocks using the European toilet paper manufacturing industry in 2020 as a case study. This industry faced extreme increases in demand due to consumers panic purchasing toilet paper after the outbreak of the COVID-19 pandemic. Our estimates show that flexibility and profitability are positively related. This is even more pronounced in times of an extreme positive demand shock when a ten percent improvement in flexibility is associated with a five percent increase in profitability.

Suggested Citation

  • Koppenberg, Maximilian & Mishra, Ashok K. & Dalhaus, Tobias & Hirsch, Stefan, 2023. "The value of firm flexibility under extreme positive demand shocks: COVID-19 and toilet paper panic purchases," Economics Letters, Elsevier, vol. 222(C).
    • Handle: RePEc:eee:ecolet:v:222:y:2023:i:c:s0165176522004396
    DOI: 10.1016/j.econlet.2022.110965
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