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The Optimality of Consumer Stockpiling Strategies

Author

Listed:
  • Robert J. Meyer

    (University of California, Los Angeles)

  • João Assunção

    (University of California, Los Angeles)

Abstract

The ability of consumers to make rational sequential purchase quantity decisions under imperfect knowledge about future prices in a product category is explored. Normatively, a consumer should make such decisions by defining a series of reservation prices which define how many buying-periods' supply should be held given an observed price. An experiment is reported in which consumers make sequential purchase quantity decisions under variations in the shape of the distribution of prices and its trend over time. Results suggest a number of systematic deviations from optimality. When facing stationary uniform and bimodal price distributions, for example, subjects tend to systematically overbuy when small purchases are called for and underbuy when large purchases are called for. Likewise, when facing ascending or descending series, behavior is the of that predicted by the normative analysis: there is an increasing tendency to defer purchases given increasing prices and accelerate purchases given descending prices. An explanation for the findings in terms of a Prospect Theory-type loss function in expenditures is offered.

Suggested Citation

  • Robert J. Meyer & João Assunção, 1990. "The Optimality of Consumer Stockpiling Strategies," Marketing Science, INFORMS, vol. 9(1), pages 18-41.
    • Handle: RePEc:inm:ormksc:v:9:y:1990:i:1:p:18-41
    DOI: 10.1287/mksc.9.1.18
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    Citations

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    Cited by:

    1. Baohong Sun, 2005. "Promotion Effect on Endogenous Consumption," Marketing Science, INFORMS, vol. 24(3), pages 430-443, July.
    2. Edwards, Kimberley D., 1996. "Prospect theory: A literature review," International Review of Financial Analysis, Elsevier, vol. 5(1), pages 19-38.
    3. Ahmadi, Iman & Habel, Johannes & Jia, Miaolei & Wei, Sarah, 2022. "Consumer stockpiling under the impact of a global disaster: The evolution of affective and cognitive motives," Journal of Business Research, Elsevier, vol. 142(C), pages 56-71.
    4. Sam K. Hui & Peter S. Fader & Eric T. Bradlow, 2009. "—The Traveling Salesman Goes Shopping: The Systematic Deviations of Grocery Paths from TSP Optimality," Marketing Science, INFORMS, vol. 28(3), pages 566-572, 05-06.
    5. Roy, Abhik & Henry, Walter, 1995. "Special issue on Pricing Strategy and the Marketing Mix," Journal of Business Research, Elsevier, vol. 33(3), pages 183-185, July.
    6. Harlam, Bari A. & Krishna, Aradhna & Lehmann, Donald R. & Mela, Carl, 1995. "Impact of bundle type, price framing and familiarity on purchase intention for the bundle," Journal of Business Research, Elsevier, vol. 33(1), pages 57-66, May.
    7. Yan Liu & Subramanian Balachander, 2014. "How long has it been since the last deal? Consumer promotion timing expectations and promotional response," Quantitative Marketing and Economics (QME), Springer, vol. 12(1), pages 85-126, March.
    8. Osuna, Ignacio & González, Jorge & Capizzani, Mario, 2016. "Which Categories and Brands to Promote with Targeted Coupons to Reward and to Develop Customers in Supermarkets," Journal of Retailing, Elsevier, vol. 92(2), pages 236-251.
    9. David Bell & Christian Hilber, 2006. "An empirical test of the Theory of Sales: Do household storage constraints affect consumer and store behavior?," Quantitative Marketing and Economics (QME), Springer, vol. 4(2), pages 87-117, June.
    10. Levy, Haim & Levy, Moshe, 2002. "Experimental test of the prospect theory value function: A stochastic dominance approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 89(2), pages 1058-1081, November.
    11. Li, Dong & Dong, Chuanwen, 2022. "Government regulations to mitigate the shortage of life-saving goods in the face of a pandemic," European Journal of Operational Research, Elsevier, vol. 301(3), pages 942-955.
    12. Dellaert, B.G.C. & Arentze, T. & Bierlaire, M. & Borgers, A. & Timmermans, H.J.P., 1997. "Investigating consumers' tendency to combine multiple shopping purposes and destinations," Discussion Paper 1997-94, Tilburg University, Center for Economic Research.
    13. Benedict Dellaert & Vladislav Golounov & Jaideep Prabhu, 2005. "The Impact of Price Disclosure on Dynamic Shopping Decisions," Marketing Letters, Springer, vol. 16(1), pages 37-52, January.
    14. Robert Slonim & Ellen Garbarino, 2009. "Similarities and differences between stockpiling and reference effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 351-371.
    15. Pinçe, Çerağ, 2021. "Forward Buying and Strategic Stockouts," European Journal of Operational Research, Elsevier, vol. 289(1), pages 118-131.
    16. Wendel, S. & Dellaert, B.G.C., 2005. "Situation variation in consumers' media channel consideration," Research Memorandum 006, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    17. Nelson Borges Amaral & Bin Chang & Rachel Burns, 2022. "Understanding consumer stockpiling: Insights provided during the COVID‐19 pandemic," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(1), pages 211-236, March.

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