Panic Buying During Epidemics: Rational vs. Irrational Behaviour
Panic buying has hit the world harshly. With the uprising of COVID-19, people are queuing endlessly in supermarkets and drugstores. In Japan, people started to excessively buy masks to protect themselves – the restriction of “one person can only buy one pack of masks” has been implemented across the country. This anxiety amongst the Japanese has not yet settled. The misunderstanding and unreliable news of the shortage of the toilet paper supply chain due to factory shutdowns in China, for instance, has translated into an unprecedentedly high demand for this product. In Italy, people have stocked up toilet paper, hand sanitizer, canned foods and pasta. Similarly, long-lasting items such as instant noodles, tissue paper, water and tinned fish are quickly being emptied from supermarket shelves in Thailand and Indonesia.
What is Panic buying? Panic buying is when vast amounts of people suddenly buy and stock up on household products, because they are worried that something bad is going to happen.
The socio-psychological root cause of this phenomenon is owed to the human’s behavioural response to uncertainty under the influences of three factors: self-control, scarcity, and social proof. Psychologically, people perceive uncertainty as a risk, so they tend to counter this problem by finding a strategy or a solution to prepare for the worst. Empirically, the continuous uptick of confirmed positive cases of COVID-19 has spiked the massive public purchase of Personal Protective Equipment (PPE) and other commodities, either as they are uncertain of when the outbreak will stop, or they are not convinced by the effectiveness of the countermeasures implemented.
Furthermore, the way people contextualise their decisions are intrinsically motivated by scarcity and social proof, associated with limited resources and group behaviour respectively. When a good is extremely needed yet scarce, people will normally try to stockpile it in order to avoid feeling regret; and it is even more secure when that product is non-perishable. This is the reason why face masks are running out of stock, and the shelf of pasta, for example, is cleared rather than that of fresh vegetables. Moreover, the intensity of people’s demand on one particular good is causally affected by how much other people need it simultaneously. The surrounding environment or social behaviour shapes the way people decide and act. This social proof surged public fear, which is escalated by “infodemics”, a term pointed out by the World Health Organisation (WHO) to refer to the lightning spread of false information via social media and other communication technologies. Therefore, there is no wonder why panic buying is seen almost everywhere because it takes only a second to click on Twitter and a few seconds to see a viral picture of a frenzy movement in the supermarket.
Panic buying in the demand-supply disruption and the epidemic is like a ‘coordination game’, a variant of Game theory. Game theory is a study of individual decision making, where those involved are affected by their rational choices and other people’s decision. This game is associated with two players; you and everyone else, with two strategies: ‘panic buying’ or ‘normal act’. Each choice is rewarded with a pay-off.
If everyone acts normally, the supply and demand are balanced. There will be enough food and necessities on the shelves, where everyone controls their anxieties and buys goods only if they need them.
However, under extreme cases with time pressure, a high probability of incorrect choices will take place. If other people are panic buying, the best strategy for us is to do the same because if not, we are left with nothing. This creates a domino effect on others, which traps everybody in a vicious cycle of panic.
The failure of this ‘coordination game’ can be addressed with these three points. The first solution is a ‘quota policy’, a policy to restrict the maximum quantity of each item everyone can buy. A quota policy might seem flawed, but it is feasible in the short-term and helps prevent individuals from selfishly overbuying goods. Furthermore, it will help ensure other groups of people have access to necessary goods. This restriction has been implemented across Australia, Singapore and other countries.
The second solution is a ‘guarantee scheme’ from the government acting as a guarantor, which may help reduce the public anxiety and fear of not getting a piece of the pie. This guarantee scheme would involve the government to hold a strategic stockpile of necessary items from food to medical supplies. The Singaporean government exercised this scheme after seeing that millions of face masks were gone from the shelves in a day — by distributing four masks to each household.
The third point is essential; the government should actively educate and inform the public. It is best to educate the public on what they should do in the case of an epidemic. Panic buying on food and necessity goods for more than ten days is not a solution to a bigger problem. Panic buying might further disrupt the supply chain and hurt the people who are more in need, most importantly face masks for health care providers. Hence, ‘governments need to develop or update their plan and essentials, in epidemic preparedness’. An epidemic preparedness advertisement will ensure people know what they should be doing in the scenario of the epidemic.
The views expressed are the author’s own and do not reflect the views of the Asian Vision Institute.