Optimal funding and hiring/firing policies with mean reverting demand

O. Bouasker, N. Letifi and Jean-Luc Prigent

Economic Modelling, 2016, vol. 58, issue C, 569-579

Abstract: We analyze the firm's investment and hiring/firing optimal strategies when the market demand is mean reverting and with potential decision reversibility. In this framework, we determine the values of both investment and hiring/firing growth and shutdown options. This allows the extension of Tserlukevich (2008) and Letifi and Prigent (2014) when taking account of a mean reverting demand. We analyze the quasi-explicit solutions for the optimal firm's value, especially the influence of mean-reverting parameters on both the growth and decay options.

Keywords: Investment value; Financial leverage; Employment level; Growth and shutdown options; Mean reverting demand (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:58:y:2016:i:c:p:569-579

DOI: 10.1016/j.econmod.2015.11.015

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