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

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

Economics Letters, 2023, vol. 222, issue C

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.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:222:y:2023:i:c:s0165176522004396

DOI: 10.1016/j.econlet.2022.110965

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