A Sticky-Price View of Hoarding

Abstract

Hoarding disrupts the functioning of markets. Yet little is known about its determinants. We analyze major recent hoarding episodes through the lens of an optimal inventory model in which risk-averse agents hoard both as a precautionary hedge against price uncertainty and to speculate when prices are predictable. Using supermarket scanner data, we provide reduced-form evidence of the importance of the speculative motive due to sticky retail prices. We use our model to quantify that speculation accounts for a meaningful fraction of overall hoarding, although smaller than precaution in our episodes.

Keywords: Retail Hoarding, Sticky Prices, Precaution, Inventory, Rice, Forecast Tests

JEL Classification: Q11, G00