Transaction costs as a source of consumer stockpiling

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 t...

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Main Authors:	Luke Garrod, Ruochen Li, Christopher Wilson
Format:	Default Article
Published:	2019
Subjects:	Other economics not elsewhere classified Consumer stockpiling Transaction costs Price discrimination Quantity discounts Differentiated markets Economics Economics not elsewhere classified
Online Access:	https://hdl.handle.net/2134/37694
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id	rr-article-9491525
record_format	Figshare
spelling	rr-article-94915252019-05-24T00:00:00Z Transaction costs as a source of consumer stockpiling Luke Garrod (7195151) Ruochen Li (1510822) Christopher Wilson (1250766) Other economics not elsewhere classified Consumer stockpiling Transaction costs Price discrimination Quantity discounts Differentiated markets Economics Economics not elsewhere classified 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. 2019-05-24T00:00:00Z Text Journal contribution 2134/37694 https://figshare.com/articles/journal_contribution/Transaction_costs_as_a_source_of_consumer_stockpiling/9491525 CC BY-NC-ND 4.0
institution	Loughborough University
collection	Figshare
topic	Other economics not elsewhere classified Consumer stockpiling Transaction costs Price discrimination Quantity discounts Differentiated markets Economics Economics not elsewhere classified
spellingShingle	Other economics not elsewhere classified Consumer stockpiling Transaction costs Price discrimination Quantity discounts Differentiated markets Economics Economics not elsewhere classified Luke Garrod Ruochen Li Christopher Wilson Transaction costs as a source of consumer stockpiling
description	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.
format	Default Article
author	Luke Garrod Ruochen Li Christopher Wilson
author_facet	Luke Garrod Ruochen Li Christopher Wilson
author_sort	Luke Garrod (7195151)
title	Transaction costs as a source of consumer stockpiling
title_short	Transaction costs as a source of consumer stockpiling
title_full	Transaction costs as a source of consumer stockpiling
title_fullStr	Transaction costs as a source of consumer stockpiling
title_full_unstemmed	Transaction costs as a source of consumer stockpiling
title_sort	transaction costs as a source of consumer stockpiling
publishDate	2019
url	https://hdl.handle.net/2134/37694
_version_	1797460025957941248

Transaction costs as a source of consumer stockpiling

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