Panic-buying is a relatively common behavioral response to a crisis that people can exhibit in situations that they perceive to be dangerous and unpredictable. This behavior was previously observed in the wake of major natural disasters, such as earthquakes and hurricanes. Several factors can account for an increase in stockpiling and panic-buying behaviors. Access to excessive amounts of information during a crisis can result in a cognitive overload, which, in turn, leads to irrational behavioral patterns. Information overload can result in health anxiety, which prompts self-isolation and the tendency to make illogical purchases. The fear of the unknown causes coping behavior in the form of panic-buying and stockpiling. Therefore, it leads to the conclusion that panic-buying can emerge as a form of stress response in certain individuals.
Peer pressure can contribute to irrational decisions in time of crisis as well. Panic-buying is defined as herd behavior, in which an individual follows the patterns exhibited by the majority. Friends or members of the family regarded as trusted advisors can also be sources of peer pressure. Overall, it is clear that in some cases, panic-buying can be a result of imitative behavior, prompted by the trust in the superior judgment of others.
Preventing Panic Buying: Methods to Consider
1. Government as a Guarantor
One of the possible options for the government to control panic buying would be assuming the role of a guarantor and ensuring that supplies will not be exhausted. This option and stress the necessity of authorities and related industries issuing assurance statements to convince the populace that no shortages are incoming. Theoretically speaking, such a guarantee could mitigate or even stop the panic buying. One of the notable reasons why people engage in panic buying in the first place is the fear of missing out. In a survey, the statement “I was afraid that suddenly there would not be enough food, medicine, etc.” was ranking relatively high as a reason given by those engaging in panic-buying. Thus, if the population trusted the government’s efficiency in its role as a guarantor, it would have less incentive to participate in panic-buying. There are also historical precedents for such policies showing them to be moderately successful – in 2008, the Australian government acted as a guarantor to mitigate the deposit run in the country’s banks.
However, there are significant reasons to doubt the effectiveness of this particular solution. To begin with, the government’s actions as a guarantor in the case of panic-buying involving supplieswould meet with considerable logistical constraints. In the case of the financial crisis of 2008, the government’s guarantee to cover the depositors’ losses required money – the resource that any government has at the ready. Yet one can hardly assume that the government already has a strategic stockpile of supplies to ensure its steady and uninterrupted supply in case of shortages. Creating this stockpile will inevitably meet with logistical issues and, even more importantly, will likely have roughly the same negative effects that the panic buying it seeks to alleviate. The main reason why panic buying is undesirable is that it leads to the large quantities of products being purchased from the market, creating stock out situations. The government creating a strategic supply would also lead to the large quantity of it being bought form the market and unavailable for immediate consumption. Considering this, the government guarantee is not an effective solution.
Apart from that, there is another significant downside to the government assuming the role of a regulator. The effectiveness of government assurance depends directly on the degree of popular trust toward the government in question. The lack of trust toward the authorities is the second most important factor that incited panic buying during the coronavirus pandemic. The less people trust their government, the more they are likely to succumb to the herd behavior and hoard various commodities out of fear of possible shortages.
2. Rationing
Another possible option to alleviate the effects of panic buying is imposing limits on the amount of goods a single customer can buy. This strategy, also known as rationing, may help to prevent possible shortages. In this case, supermarkets and other outlets will be responsible for enforcing the sales bars to ensure the availability of goods. Moreover, with cooperation between the government, healthcare services, and outlets to ensure that the people with special needs could obtain necessary supplies at fixed prices. This strategy, also known as the price ceiling, requires the government to compensate for the difference between the fixed prices and the market prices but does not involve overbearing logistical effort. With this consideration in mind, it is a preferable alternative to the strategic stockpiling of supplies.
Apart from the fixed prices for the more vulnerable categories of consumers, this approach should also exert a beneficial influence over the market prices. Shifts in consumption during crisis situations occur as a result of the interplay between supply availability and consumer demand. In case of panic buying, there is a spiking increase in demand, meaning that the equilibrium will move toward a greater price. Introducing rationing and imposing limits on the amount of supplies one customer can buy would correspondingly limit the demand. The equilibrium would still move toward a higher price, as the reason behind the panic buying – the coronavirus outbreak – would still remain in force. Yet limiting the increase in demand would mean that the price growth would not be as severe as without rationing. Thus, rationing as a strategy has three advantages simultaneously: it is simpler to impose, it mitigates the risks of shortages, and it alleviates the price growth resulting from a sudden increase in demand.