Stockpiling‐based pricing and its welfare effects

Consumer stockpiling involves the intertemporal demand substitution that allows the firm to differentiate stockpilers from others and employ varying pricing strategies. In this paper, I set up a two‐period monopoly model that incorporates consumer stockpiling behavior to investigate the effect of st...

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Bibliographic Details
Published in:International journal of economic theory 2024-09, Vol.20 (3), p.371-391
Main Author: Li, Ruochen
Format: Article
Language:English
Subjects:
consumer inventory
Consumers
Discrimination
Equilibrium
Monopolies
price discrimination
storage
Welfare
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Summary:Consumer stockpiling involves the intertemporal demand substitution that allows the firm to differentiate stockpilers from others and employ varying pricing strategies. In this paper, I set up a two‐period monopoly model that incorporates consumer stockpiling behavior to investigate the effect of stockpiling‐based pricing. In equilibrium, I show that when the level of heterogeneity among consumers is high, consumer stockpiling can be used as a device for the firm to identify preferences and price discrimination. Welfare analysis suggests that consumer stockpiling improves consumer surplus and profit despite the associated stockpiling‐based pricing.
ISSN:1742-7355
1742-7363
DOI:10.1111/ijet.12406