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Capital stock management during a recession that freezes credit markets

Author

Listed:
  • Caulkins, Jonathan P.
  • Feichtinger, Gustav
  • Grass, Dieter
  • Hartl, Richard F.
  • Kort, Peter M.
  • Seidl, Andrea

Abstract

This paper considers the problem of how to price a conspicuous product while maintaining liquidity during a recession which both reduces demand and freezes credit markets. Reducing price would help maintain cash flow, but low prices can erode brand image and, hence, long-term sales. The paper extends earlier work of the same authors by explicitly deriving a firm's optimal cash management behavior, taking into account that a too low cash level results in bankruptcy.

Suggested Citation

  • Caulkins, Jonathan P. & Feichtinger, Gustav & Grass, Dieter & Hartl, Richard F. & Kort, Peter M. & Seidl, Andrea, 2015. "Capital stock management during a recession that freezes credit markets," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 1-14.
    • Handle: RePEc:eee:jeborg:v:116:y:2015:i:c:p:1-14
    DOI: 10.1016/j.jebo.2015.02.023
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    References listed on IDEAS

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    Cited by:

    1. Benkraiem, Ramzi & Lakhal, Faten & Zopounidis, Constantin, 2020. "International diversification and corporate cash holding behavior: What happens during economic downturns?," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 362-371.
    2. Richard F. Hartl & Peter M. Kort & Andrea Seidl, 2020. "Decisions on pricing, capacity investment, and introduction timing of new product generations in a durable-good monopoly," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 28(2), pages 497-519, June.

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    More about this item

    Keywords

    Conspicuous consumption; Optimal control; Recession; Bankruptcy;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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