The value of firm flexibility under extreme positive demand shocks: COVID-19 and toilet paper panic purchases
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.
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| Main Authors: | , , , |
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| Format: | Article/Letter to editor biblioteca |
| Language: | English |
| Subjects: | Life Science, |
| Online Access: | https://research.wur.nl/en/publications/the-value-of-firm-flexibility-under-extreme-positive-demand-shock |
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| Summary: | 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. |
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