Adaptive Strategies of the Firm through a Business Cycle

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Authors: R. Leban, J. Lesourne

Publication Year: 1983

Source: http://www.sciencedirect.com/science/article/pii/0165188983900222

Journal: Journal of Economic Dynamics and Control

Volume: 5

Issue: 1

Categories: Innovation, Adaptive Cycle


Abstract

The paper examines the behaviour of a profit-maxim& g fi which forecasts a recession and which has at its disposal to regulate its level of equipment and its level of employment three variables (investment, recruitment, firing), the selling price being held constant. It shows that (i) the expectation of a recession by a firm is enough to launch a real recession in $he demand for production factors (equipment and recruitment); (ii) by comparison with a situation in which the !irm may manipulate the selling price, price rigidities imply the occurrence of excess capacity - in addition, they do not allow the Iirm to delay firing and induce a stronger irregularity in recruitment and firing, and (ii) depending on the characteristics of the lirm and of the environment a unique model is compatible with a whole variety of behavioural patterns.