5 ms·
> But making it profitable to be the one with stock on hand in an emergency would encourage holding bigger buffers during the good times. This isn’t always tru
by thephyber 5y ago
> But making it profitable to be the one with stock on hand in an emergency would encourage holding bigger buffers during the good times.
This isn’t always true. It is only the case if the long term incentives outweigh the short term incentives.
If the good has a long shelf life and it is a good use of the retailer’s capital, sure. Those are not certain conditions. Also, goods can go obsolete. Would it have been a good investment for CircuitCity to keep an extra 1000 units of Microsoft Zune in stock in case there was a pandemic?
- lmm 5y ago> If the good has a long shelf life and it is a good use of the retailer’s capital, sure. Those are not certain conditions. Also, goods can go obsolete. Would it have been a good investment for CircuitCity to keep an extra 1000 units of Microsoft Zune in stock in case there was a pandemic? Those are the kind of questions that markets are great at figuring out, if it wasn't illegal to sell at an actual market-clearing price.
- thephyber 5y agoCitation needed. When the price of wood and paint went through the roof in summer 2020, there were no prosecutions for price gouging. But consumers did change behavior to delay their purchases until prices were more reasonable. Price elasticity is not a linear function.