A Sticky-Price View of Hoarding
Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 1-050
51 Pages Posted: 21 Nov 2014 Last revised: 18 Jul 2019
Date Written: July 17, 2019
Household hoarding of staple foods during periods of scarcity is conventionally portrayed as driven by precaution. By paying high prices for inventories to hedge price uncertainty, households are thought to destabilize commodity markets. However, retail prices are sticky, responding with delay to supply shocks. Hoarding hence conflates precaution with anticipatory stockpiling due to sticky prices. With U.S. scanner data covering a classic 2008 rice hoarding episode, we find that household inventories anticipated delayed retail-price adjustment. There would be significantly less hoarding absent sticky prices. Traditional policy measures invoked during commodity-market bubbles or shortages can be counterproductive under the sticky-price view.
Keywords: Hoarding, Commodity Bubbles, Rice, Commodity Pricing
JEL Classification: Q11, G00
Suggested Citation: Suggested Citation