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Stockpiling‐based pricing and its welfare effects

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  • Ruochen Li

Abstract

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.

Suggested Citation

  • Ruochen Li, 2024. "Stockpiling‐based pricing and its welfare effects," International Journal of Economic Theory, The International Society for Economic Theory, vol. 20(3), pages 371-391, September.
    • Handle: RePEc:bla:ijethy:v:20:y:2024:i:3:p:371-391
    DOI: 10.1111/ijet.12406
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