How Do Firm Financial Conditions A¤ect Product Quality and Pricing?
نویسندگان
چکیده
We analyze the interaction of rm product quality and pricing decisions with nancial distress and bankruptcy in the airline industry. We consider an airlines choice of quality and price as dynamic decisions that trade o¤ current cash ows for future revenue. We examine how airline mishandled baggage, on-time performance and pricing are related to nancial distress and bankruptcy, controlling for the endogeneity of nancial distress and bankruptcy. We nd that an airlines quality and pricing decisions are di¤erentially a¤ected by nancial distress and bankruptcy. Product quality decreases when airlines are in nancial distress, consistent with nancial distress reducing a rms incentive to invest in quality. In addition, rms price more aggressively when in nancial distress consistent with them trying to increase short-term market share and revenues. In contrast, in bankruptcy product quality increases relative to nancial distress.
منابع مشابه
How Do Firm Financial Conditions Affect Product Quality and Pricing?
We analyze the interaction of firm product quality and pricing decisions with financial distress and bankruptcy in the airline industry. We consider an airline’s choices of quality and price as dynamic decisions that trade off current cash flows for future revenue. We examine how airline mishandled baggage, on-time performance and pricing are related to financial distress and bankruptcy, contro...
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