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 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.