A Sticky-Price View of Hoarding
Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 1-050
65 Pages Posted: 21 Nov 2014 Last revised: 6 Sep 2022
Date Written: September 4, 2022
Households often hoard staples during inflationary periods stemming from cost shocks. Hoarding is generally attributed to precautionary buying. But we point out that it could also be driven by sticky retail prices. When stores are slow to adjust prices following a cost shock, households have an incentive to stockpile just as in a typical retail sale. Disentangling these motives is valuable for informing policy responses. Using supermarket scanner data on rice purchases from the 2008 global rice crisis and early months of COVID-19, we provide evidence consistent with the presence of a sticky-price channel. To quantify the size of these two motives, we propose a test from a model of costly storage where optimal inventory responds to price discounts and is a hedge against price fluctuations. While smaller than precautionary buying, the sticky-price motive nonetheless accounts for a meaningful fraction of total hoarding.
Keywords: Retail Hoarding, Sticky Prices, Precaution, Inventory, Rice, Forecast Tests
JEL Classification: Q11, G00
Suggested Citation: Suggested Citation