A Sticky-Price View of Hoarding
Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 1-050
47 Pages Posted: 21 Nov 2014 Last revised: 20 Apr 2020
Date Written: April 16, 2020
Hoarding of staples has long worried policymakers due to concerns about shortages. We quantify how sticky store prices --- delayed price adjustment to shocks by reputable retailers --- exacerbate hoarding. When prices are sticky, households hoard not only for precautionary motives but also non-precautionary motives: they stockpile as they would during a standard retail promotion or for the purpose of retail arbitrage. Using US supermarket scanner data covering the 2008 Global Rice Crisis, an episode driven by an observable cost shock due an Indian ban on raw rice exports, we find that sticky prices account for a sizeable fraction of hoarding. Hoarding is mostly for own use and more prevalent among richer households. Our findings are consistent with media reports of distributional concerns associated with hoarding during the Covid-19 Pandemic.
Keywords: Hoarding, Commodity Bubbles, Rice, Commodity Pricing
JEL Classification: Q11, G00
Suggested Citation: Suggested Citation