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Article
Publication date: 5 March 2024

Zhongfeng Sun, Guojun Ji and Kim Hua Tan

This paper aims to study the joint decision making of advance selling and service cancelation for service provides with limited capacity when consumers are overconfident.

Abstract

Purpose

This paper aims to study the joint decision making of advance selling and service cancelation for service provides with limited capacity when consumers are overconfident.

Design/methodology/approach

For the case in which consumers encounter uncertainties about product valuation and consumption states in the advance period and are overconfident about the probability of a good state, we study how the service provider chooses the optimal sales strategy among the non-advance selling strategy, the advance selling and disallowing cancelation strategy, and the advance selling and allowing cancelation strategy. We also discuss how overconfidence influences the service provider’s decision making.

Findings

The results show that when service capacity is sufficient, the service provider should adopt advance selling and disallow cancelation; when service capacity is insufficient, the service provider should still implement advance selling but allow cancelation; and when service capacity is extremely insufficient, the service provider should offer spot sales. Moreover, overconfidence weakens the necessity to allow cancelation under sufficient service capacity and enhances it under insufficient service capacity but is always advantageous to advance selling.

Practical implications

The obtained results provide managerial insights for service providers to make advance selling decisions.

Originality/value

This paper is among the first to explore the effect of consumers’ overconfidence on the joint decision of advance selling and service cancelation under capacity constraints.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 5 May 2023

Pragati Priya and Chandan Sharma

The study examines how the liquid assets holdings among non-financial Indian firms vary due to tightening monetary policy and increasing macroeconomic uncertainty.

Abstract

Purpose

The study examines how the liquid assets holdings among non-financial Indian firms vary due to tightening monetary policy and increasing macroeconomic uncertainty.

Design/methodology/approach

The authors analyze 5,640 firms for the period 2011–2021. The authors first estimate India’s monetary policy shocks by decomposing the exogenous shocks from the systematic component of monetary policy changes. The authors then examine the effects of the estimated monetary policy shocks and a range of macroeconomic and policy uncertainty indicators on companies’ cash and bank balances to asset ratios using two-step system generalized method of moments (GMM) estimators.

Findings

The authors find that monetary policy shocks cause the cross-sectional variances for the firms’ liquidity holdings to increase. In anticipation of macroeconomic volatility, companies respond to these shocks after taking into account all the firm-level information to minimize the opportunity costs of holding extra cash or too few cash balances that can hamper firms’ operations. Furthermore, compared to other shocks, the contribution of inflation-induced shocks is predicted to be the largest in the cross-sectional deviation of the firm’s cash holdings. The authors also find that low-growth, older and financially constrained firms observe lesser heterogeneity in their cash holdings as they tend to hold cash as a precautionary buffer.

Originality/value

The authors’ approach to the analysis is unique in many ways. To address potential transmission bias, the authors use nowcasts and forecasts of real gross domestic product (GDP) growth and inflation to generate a series of exogenous monetary policy shocks for identifying unanticipated changes in short-term interest rates. Subsequently, the authors estimate how these shocks affect the cross-sectional deviation of liquid assets. For estimating the effects of macroeconomic uncertainty on corporate cash demand, the authors utilize a range of proxies for uncertainty. Unlike previous attempts, the authors offer evidence for a developing and fast-emerging economy.

Details

International Journal of Managerial Finance, vol. 20 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

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