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Market demand and the duration of business projects: the housing industry

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Author Info

  • Kostas Axarloglou

    (Department of International Economic Relations and Development, Democritus University of Thrace, University Campus, Komotini, Greece)

  • Stefanos Zarkos

    (ALBA Graduate School of Business, Vouliagmeni, Greece)

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    Abstract

    In this study, we propose that companies strategically choose to pursue projects of certain duration according to the fluctuations in market demand conditions. During a market upturn, when more business opportunities are available, companies choose short projects, committing thus their resources for a short period of time and so to better exploit the upcoming business opportunities. On the other hand, in a market downturn projects of longer duration are preferable, since they protect the company from the consequences of adverse market conditions. Finally, these insights appear relevant at least in the US housing industry, where builders pursue longer building projects during the market downturn and shorter ones during the market upturn. Copyright © 2010 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.1505
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 31 (2010)
    Issue (Month): 7 ()
    Pages: 477-487

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    Handle: RePEc:wly:mgtdec:v:31:y:2010:i:7:p:477-487

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    References

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    1. Christina D. Romer, 1999. "Changes in Business Cycles: Evidence and Explanations," NBER Working Papers 6948, National Bureau of Economic Research, Inc.
    2. Jeffrey A. Miron, 1990. "The Economics of Seasonal Cycles," NBER Working Papers 3522, National Bureau of Economic Research, Inc.
    3. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1993. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing: Reply," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 734-35, November.
    4. Kostas Axarloglou, 2003. "The Cyclicality of New Product Introductions," The Journal of Business, University of Chicago Press, vol. 76(1), pages 29-48, January.
    5. C. Tsuriel Somerville, 2001. "Permits, Starts, and Completions: Structural Relationships Versus Real Options," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(1), pages 161-190.
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    Cited by:
    1. Axarloglou, Kostas & Visvikis, Ilias & Zarkos, Stefanos, 2012. "The Time Dimension And Value Of Flexibility In Resource Allocation: The Case Of The Maritime Industry," DUTH Research Papers in Economics 2-2012, Democritus University of Thrace, Department of Economics.

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