Essays on consumption flexibility, stockpiling and market interaction

This dissertation investigates the role of consumption flexibility and stockpiling in consumer and firm decision-making, interaction and competition. Particularly, it shows that consumption flexibility could promote consumers to purchase different products simultaneously and thus mitigate price competition. However, firms may actually cut prices too much to induce multiple buying. As a result, competing firms may not benefit from consumption flexibility unless they endogenously decease horizontal differentiation. The distinction from preference change and the importance of consumption flexibility in grocery shopping is also documented in a structural choice model estimated on scanner panel data. Lastly, the dissertation studies how consumer stockpiling could generate temporal price dispersion, while being endogenously induced as rational consumers adjust purchase timing in response to anticipated price dynamics. The economic forces underlying price competition in presence of stockpiling are identified.