by: Prof. Kresna Navarro-Mansueto

Aside from the abrupt weight gain during the Christmas season, one noticeable effect is the soaring prices of consumer goods, especially food. One culprit is our spending behavior. During this season, we have a relatively high willingness to pay (WTP) for goods – we think of buying those that we cannot buy in the previous months.

Our willingness to pay comes from the unusual high money we receive from months starting October until December, while others are still receiving unusual take-home pay until February (e.g., Chinese New Year). With the extra money, we tend to buy more goods. Sellers are happy to serve at our whim, noticing our spending behavior. With their stocks running low, they tend to bid out their goods to whoever is willing to pay at high prices. The bidding-like activity causes the prices to spiral; thus, the current situation in our market; of course, other factors are constant (i.e., ceteris paribus).