Working Paper: CEPR ID: DP14633
Authors: Aureo de Paula; Christopher Hansman; Harrison Hong; Vishal Singh
Abstract: We show that sticky prices exacerbate household hoarding of storable goods. When stores are slow to adjust prices following a cost shock, households have an incentive to stockpile just as in a typical retail sale. This incentive is present even in the absence of traditional panic orprecautionary motives for hoarding. Using detailed US supermarket scanner data covering the 2008 global rice crisis—a shock triggered by an Indian rice export ban—we find that household hoarding anticipated retail price adjustments. We construct forecast tests relating the cross-section of product or store-level price adjustments to the expectations implied by consumer purchases. Bias and efficiency tests reject panic/precautionary motives in favor of a sticky price view.
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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sticky prices (D41) | household hoarding of storable goods (D10) |
| households stockpile in anticipation of future price increases (D10) | household hoarding of storable goods (D10) |
| speculative motive (D84) | household hoarding of storable goods (D10) |
| magnitude of future price increases (Q47) | household hoarding of storable goods (D10) |
| speculation (D84) | overall hoarding (D10) |
| precautionary motive (D81) | overall hoarding (D10) |
| sticky prices (D41) | hoarding behavior during COVID-19 crisis (E71) |