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

See all articles by Christopher Hansman

Christopher Hansman

Imperial College Business School

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Aureo de Paula

University College London - Department of Economics

Vishal Singh

New York University (NYU) - Department of Marketing

Multiple version iconThere are 4 versions of this paper

Date Written: September 4, 2022

Abstract

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

Hansman, Christopher and Hong, Harrison G. and de Paula, Aureo and Singh, Vishal, A Sticky-Price View of Hoarding (September 4, 2022). Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 1-050, Available at SSRN: https://ssrn.com/abstract=2528080 or http://dx.doi.org/10.2139/ssrn.2528080

Christopher Hansman

Imperial College Business School ( email )

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HOME PAGE: http://chrishansman.com/

Harrison G. Hong (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Aureo De Paula

University College London - Department of Economics ( email )

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Vishal Singh

New York University (NYU) - Department of Marketing ( email )

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New York, NY
United States

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