A Sticky-Price View of Hoarding

Aureo de Paula, Christopher Hansman, Harrison Hong and Vishal Singh

No 14633, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 or precautionary 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.

Date: 2020-04
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