Stockpiling and Shortages (the “Toilet Paper Paper")
Tilman Klumpp ()
No 2021-2, Working Papers from University of Alberta, Department of Economics
Widespread stockpiling of everyday household items (e.g., toilet paper) occurred in the wake of the Covid-19 pandemic, resulting in shortages of these items in stores. Both phenomena reinforce each other: The expectation of shortages causes stockpiling behavior, which in turn amplifies the shortages, which in turn encourages more stockpiling. In this paper, I examine this feedback loop. In the model, households want to consume one unit of a good per period, but can store more than one unit at a cost. Aggregate supply of the good may be insufficient to meet aggregate demand, but prices cannot adjust to equate supply and demand. I characterize stationary equilibria in which households maintain target inventories of z units. Thus, stockpiling arises if z > 1, and I demonstrate that this can be an equilibrium even for very small aggregate supply-demand imbalances. In particular, in many equilibria the incentive to stockpile is driven mostly by the stockpiling behavior of other households, and not by the fundamental supply shortage. Transitional dynamics are examined as well.
Keywords: storage; consumer inventories; stockpiling; multiple equilibria; rationing; mean field games; search models (search for similar items in EconPapers)
JEL-codes: C61 C62 C73 D15 (search for similar items in EconPapers)
Pages: 42 pages
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://sites.ualberta.ca/~econwps/2021/wp2021-02.pdf Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2021_002
Access Statistics for this paper
More papers in Working Papers from University of Alberta, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Joseph Marchand ().