Capital stock management during a recession that freezes credit markets

Jonathan P. Caulkins, Gustav Feichtinger, Dieter Grass, Richard F. Hartl, Peter Kort and Andrea Seidl

Journal of Economic Behavior & Organization, 2015, vol. 116, issue C, 1-14

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.

Keywords: Conspicuous consumption; Optimal control; Recession; Bankruptcy (search for similar items in EconPapers)
JEL-codes: C61 M31 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:116:y:2015:i:c:p:1-14

DOI: 10.1016/j.jebo.2015.02.023

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