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Optimal funding and hiring/firing policies with mean reverting demand

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  • Bouasker, O.
  • Letifi, N.
  • Prigent, J.-L.

Abstract

We analyze the firm's investment and hiring/firing optimal strategies when the market demand is mean reverting and with potential decision reversibility. In this framework, we determine the values of both investment and hiring/firing growth and shutdown options. This allows the extension of Tserlukevich (2008) and Letifi and Prigent (2014) when taking account of a mean reverting demand. We analyze the quasi-explicit solutions for the optimal firm's value, especially the influence of mean-reverting parameters on both the growth and decay options.

Suggested Citation

  • Bouasker, O. & Letifi, N. & Prigent, J.-L., 2016. "Optimal funding and hiring/firing policies with mean reverting demand," Economic Modelling, Elsevier, vol. 58(C), pages 569-579.
    • Handle: RePEc:eee:ecmode:v:58:y:2016:i:c:p:569-579
    DOI: 10.1016/j.econmod.2015.11.015
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