Herd behaviourįrom one perspective you could argue that every action a consumer takes is rational because they are doing what they think is best. It is better to wait, let the temporary crisis pass and then buy when the panic and queues are over. In this case, you could argue it is irrational to spend 20 minutes in a queue when you don’t need petrol for several days. However, if you panic at the sight of others queuing, you may waste time in a queue you don’t need to be in – just because you are basing your behaviour on what others are doing – not what is in your best interest. In this case, it is more rational to not queue up but when for normality to return. If there is no real shortage, but just the issue of surge buying and supply issues, then the crisis is likely to last only a few days. For example, suppose you are a relatively modest user and have enough petrol to last a few weeks. You could argue there are cases when panic buying petrol is irrational.
ECONOMIX PANIC FULL
If you have a full tank, you can be quietly pleased that you are not the anxious person queuing up for petrol Irrational panic buying
ECONOMIX PANIC PLUS
Plus when you have a full tank, it reduces the mental anxiety of not knowing if you will be able to buy petrol. But, importantly buying early avoids the potentially very high cost of being at the back of the queue and missing out. The consumer then has the very high cost of not being able to get to work/travel.īuying petrol early imposes relatively low costs (the main cost may be the time of queuing up) but there is no financial cost of filling up a tank because you are definitely going to use it.
If they wait a few days, then they may use up all their available petrol but then the petrol stations will be empty and they can’t refill. A rational consumer will predict that reports of shortages will encourage other consumers to go out and buy petrol and therefore the shortages may become more acute over time. If shortages of petrol are reported, then a rational response of a consumer may well be to join the queue and get petrol before it becomes unavailable. Also, with non-perishable goods like toilet paper and dried pasta, they should be able to use over the coming months, so there is a very limited financial cost. Buying a large quantity gives the consumer peace of mind and is a way for them to psychologically deal with the image of empty shelves. The sight of empty shelves in supermarkets may create great anxiety. However, from an individual perspective, panic buying could still be a rational response. You could argue this is irrational if the disruption is expected to last several days, but individuals buy enough to last several months. For example, in response to Covid crisis, some people responded by buying enough toilet paper for several weeks. Some panic buying could be seen to be irrational. Is panic buying rational or irrational behaviour? Supply and demand diagram showing impact of panic buying when supply is inelastic “No need to panic buy” When politicians say there is ‘no need to panic buy’ – it often has the reverse psychology of making people think there must be a crisis if a politician is trying to manage the situation.Even if you know only 1% are affected, you may correctly predict that the important thing is how other people will respond Because there is a fear of running out, people will respond by buying more – creating a self-fulfilling prophecy of more petrol stations running out. q%) run out of petrol, then images of these empty petrol stations may give a falsely misleading impression that the whole country is at a risk of shortage. If a petrol station is fully functioning, it is not newsworthy. If people know supply is inelastic, then it encourages panic buying This means that if demand increases above the average level, supplies cannot easily respond (inelastic in short-term). Supply chains reliant on just in time management.The recent experience of UK where reports of some petrol shortages, caused a surge in buying of petrol – causing more shortages and encouraging more to panic buy. Reports of empty shelves/empty gas pumps.during Covid lockdowns there was an increase in buying of staple items like toilet paper and dried pasta. Fears over supply chain shortages, e.g.Health crisis which causes people to stock up on health care products, e.g.Petrol queues September 2021, Menston, Yorkshire Reasons for panic buying could include A related concept is ‘surge buying’ where people buy more than usual for rational reasons. Panic buying is a situation where consumers buy an unusually large quantity of a good in anticipation of coming uncertainty. Panic buying – is it rational or irrational
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