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

Maximilian Koppenberg; Ashok K. Mishra; Tobias Dalhaus; Stefan Hirsch

doi:10.1016/j.econlet.2022.110965

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

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

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3 Scopus citations

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.

Original language	English
Article number	110965
Journal	Economics Letters
Volume	222
DOIs	https://doi.org/10.1016/j.econlet.2022.110965
State	Published - Jan 2023
Externally published	Yes

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abstract = "We estimate the relationship between firms{\textquoteright} 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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The value of firm flexibility under extreme positive demand shocks: COVID-19 and toilet paper panic purchases

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