Baumol model

This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.

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September 24, 2020 at 7:29 pm #586573
espie
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Hi John,
Thank you for the lecture – I fully understand the arithmetic in your lecture (example 2) and seems relatively straightforward. Why do you say that the model is not practical?
Thanks!
September 25, 2020 at 8:28 am #586601
John Moffat
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I say it is not very practical for most businesses. The reason is that it assumes a need for cash during the year at a constant rate, which is not likely to be the case fo most business.
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