DP14633 A Sticky-Price View of Hoarding

Author(s): Áureo De Paula, Christopher Hansman, Harrison Hong, Vishal Singh
Publication Date: April 2020
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14633

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.