Authors: Augustinos Dimitras, George Peppas

Title: Cost stickiness: evidence from pre- and post-crisis periods; do different sales changes levels matter?

Abstract

Cost functions as the foundation of managerial decision making usually assume a linear cost function with fixed and variable costs. The latter are dominantly regarded as being identical for increasing and for decreasing activity levels. However, empirical research shows that the decline in costs is smaller for decreasing than the rise in costs for increasing activity levels for the same amount of change. This effect of asymmetric cost behavior is called ‘cost stickiness’ or ‘cost remanence’. Our paper we use a quantile regression approach and we provide evidence that the stickiness part is not symmetrical. Moreover, we our result also show that the cost function to sales changes alters during crisis. Quantile regression can provide evidence not only as a traditional cost stickiness tool but also investigate if the cost stickiness phenomenon is evident in different levels of sales change. To our knowledge cost stickiness has not been tested with different levels of sales changes using a quantile approach.