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The Time Dimension And Value Of Flexibility In Resource Allocation: The Case Of The Maritime Industry

Listed author(s):
  • Axarloglou, Kostas

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

  • Visvikis, Ilias

    (ALBA Graduate Business School)

  • Zarkos, Stefanos

    (ALBA Graduate Business School)

Registered author(s):

    The paper analyses empirically the time-varying properties of the spread between voyage and time-charter rates and presents evidence that these properties are directly related to the business cycle (market demand) of the maritime industry, to the expectations for the future market demand and to market volatility. Using a real options methodology, we demonstrate that the time-varying properties of the spread is the outcome of the strategic decision to time-commit company resources in the industry. It is shown that, during a market upturn (downturn) managers choose to commit company resources for a short period (long period), and thus, maintain flexibility (commitment) in better exploiting the upcoming business opportunities (protecting company resources from lack of business opportunities). Overall, the fluctuations of the time-varying spread, between voyage and time-charter rates, offer managerial insights in resource allocation that can better shape up chartering, budgeting and financial management decisions on the time commitment of resources in the maritime industry.

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    Paper provided by Democritus University of Thrace, Department of Economics in its series DUTH Research Papers in Economics with number 2-2012.

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    Length: 28 pages
    Date of creation: 27 Jan 2012
    Handle: RePEc:ris:duthrp:2012_002
    Contact details of provider: Postal:
    Department of Economics, University Campus, Komotini, 69100, Greece

    Phone: (25310) 39.503
    Fax: (25310) 39.502
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