The Effects of Sales-change Size on the Asymmetric Cost Behavior

ABJ focus on the current period sales-change direction and predicted asymmetric cost behavior. BBCM extended ABJ model by considering the prior period’s sales changes on asymmetric cost behavior. Recently, Ciftci and Zoubi(2019) investigated the impacts of current sales-change size on asymmetric cost behavior extending BBCM’s two-period model. The purpose of our study is to analyze the effects of current sales-change size on asymmetric cost behavior in Korea using Ciftci and Zoubi model. The results of the analysis are as follows. First, In the case of prior sales increase, current small(medium) sales change affects more significantly to the stickiness of cost than large current sales change. In addition, in the case of prior sales decrease, current small(medium) sales change lessens the stickiness of cost more significantly than large current sales change. These results are consistent with our hypotheses. However, medium-size sales change’ coefficient is large than that of small-size sales change, so the relationship between current sales change and cost stickiness is not monotonic, and the model including dummy variables’ main effect terms is somewhat unstable, and in the case of prior sales decrease, the model doesn’t show anti-stickiness. We need more additional research to find out these anomalies are due to difference of cost behavior between Korea and U.S. or defects of the model.