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[19351682 - The B.E. Journal of Economic Analysis & Policy] Transaction Costs as a Source of Consumer Stockpiling.pdf (261.04 kB)

Transaction costs as a source of consumer stockpiling

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posted on 2019-05-03, 10:15 authored by Luke Garrod, Ruochen Li, Christopher WilsonChristopher Wilson
Consumers often stockpile goods to store for future consumption. The existing theoretical literature has focussed on a price-based explanation where stockpiling arises due to temporary price reductions. In contrast, this paper explores a transaction-cost-based explanation where consumers stockpile to avoid the need to incur future transaction costs. It shows how transaction costs lead to positive consumer stockpiling in an oligopoly equilibrium even when future prices are expected to fall. Relative to a no-stockpiling benchmark, such stockpiling lowers profits, but improves consumer and total welfare. Our results extend to the case of quantity discounts where stockpiling consumers pay relatively lower per-unit prices than non-stockpiling consumers, when purchasing multi-unit bundles.

History

School

  • Business and Economics

Department

  • Economics

Published in

The B.E. Journal of Economic Analysis & Policy

Volume

19

Issue

3

Citation

GARROD, L., LI, R. and WILSON, C.M., 2019. Transaction costs as a source of consumer stockpiling. The B.E. Journal of Economic Analysis & Policy, 19 (3), 20170316.

Publisher

© De Gruyter

Version

  • VoR (Version of Record)

Publisher statement

This paper was published in the journal The B.E. Journal of Economic Analysis & Policy and is available at https://doi.org/10.1515/bejeap-2017-0316.

Acceptance date

2019-05-02

Publication date

2019-05-24

eISSN

1935-1682

Language

  • en

Article number

20170316

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