[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
journal contribution
posted on 2019-05-03, 10:15 authored by Luke Garrod, Ruochen Li, Christopher WilsonChristopher WilsonConsumers 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 & PolicyVolume
19Issue
3Citation
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 GruyterVersion
- 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
2019-05-02Publication date
2019-05-24eISSN
1935-1682Publisher version
Language
- en