Economy.
Introduction.
Coronavirus is an infectious disease that originated in Wuhan, China. The new disease is a newly discovered form of Coronavirus and has a very high rate of infection. It spreads through contact of saliva or discharge from the nose when a person is infected sneezes or coughs (Guan et al., 2020). When governments brought its presence to people’s attention, a lot of speculations that were conflicting about the disease and the measures that the government might take, run like wildfire on the internet. Some people with the notion that food and necessities may end up running out of stock thronged in supermarkets clearing out shelves and filled their trolleys.
Depletion of stocks.
This behavior did not escape the internet, and like a ripple effect, it caused mass panic and resulted in many people all over the world to run for more supplies in the supermarket. The act escalated further since people who had no fear had to adopt the same behavior since they panicked when they saw many people clearing shelves in supermarkets. The fear that products might run out was the main reason that products run out (Zhang et al., 2020). A product that suffered under this behavior was tissue paper. The product was bought in huge loads such that countries such as Australia, New Zealand, the United States and Hong Kong run out of stock. For instance, Australia ran out of tissues to such an extent that for a whole week Australia’s NT News had to print eight blank pages that readers could use in case of emergency. This essay will seek to analyze using game theory and rational consumer choice, whether this act of panic buying represents rational or irrational behavior.
Game theory.
According to Myerson (2013), game theory is a mathematics branch that is mainly focused on the analysis of strategies for dealing with situations that are competitive in nature. In this situation, a person’s action is highly dependent on the activities of other participants. The theory places its belief that the actions placed by an individual as a response to other people’s behavior is totally reasonable and is thus considered as rational behavior.
The game theory considers that for effect to occur, there has to be two players in action. The first player is the individual himself and the second player is everyone else. These two form a crucial role in the performance of the coordination game (Rasmusen, 1989). Following these players’ actions on product purchase, two strategies result as an outcome. The first strategy is the panic buying of products, whereas the second strategy is to act normally on purchase of a product. For example, in New Zealand, tissue paper became the most popular product to run out of stock due to people’s actions in relation to other people’s actions. Before Coronavirus pandemic, everything was considered normal hence people behaved normally. As a result of this normal behavior exhibited by everyone else, the second player who is the individual acts normally; thus, products remain in good supply and are well stocked in the shelves. Due to the relaxed environment where people can buy products when they need to a state of desirable equilibrium is achieved. When other people buy products in panic of depletion, the optimal strategy of the individual is to do the same. This is done out of fear that if the product actually runs out, the individual will end up suffering due to a lack of the necessity. This state results in undesirable equilibrium being achieved. Stocking up as a response to other people stocking up is considered a pretty rational choice since in the event the product actually runs out the individual will not have missed out; hence will not suffer.
Behavioral theory.
Behavioral theory is based on the idea that the actions displayed by people are as a response to conditioning brought about by the interaction with the environment (Lunn et al., 2020). When a product is rumored to run out of stock, such as tissue paper in New Zealand, people will tend to buy lots of supplies to ensure that they don’t miss out if the event does occur. This action is based out of a sense of fear and not out of reason. Reason would make a person to analyze whether such a pandemic will result in a shortage of products and more specifically, why tissues are needed in such a pandemic. Though this would be the preferred method as dictated by behavioral theory it is not practical. This is because in the world we live during times of a crisis such as the coronavirus pandemic, it is human instinct to be over prepared due to the need to survive (Smits and Ally, 2003). If a person did a proper analysis in such a crisis, he would have preferred to prioritize their stock on masks and sanitizers as this would have been the reasonable action in response to such a disease that requires utmost hygiene. But since other people’s actions influenced the person he is this said to have acted irrationally.
Conclusion.
Based on the essay, it is safe to state that panic buying of products is justifiably a rational behavior. Pandemics are rare in occurrence and when they do occur, they tend to cause a lot of commotion since people are usually not prepared for the event (Prati et al., 2011). During this period, rumors such as resources running may spread and may result in people overstocking and cleaning out shelves. For such a case where tissues run out, people’s behavior of stocking on the product is reasonable since if the product runs out as it did, those who did not stock on them will end up suffering. It is better to find out the actual needs after one has secured himself from such an occurrence since, after all, it is better to be safe than sorry.
References:
Guan, W. J., Ni, Z. Y., Hu, Y., Liang, W. H., Ou, C. Q., He, J. X., … & Du, B. (2020). Clinical characteristics of 2019 novel coronavirus infection in China. MedRxiv.
Lunn, P. D., Belton, C. A., Lavin, C., McGowan, F. P., Timmons, S., & Robertson, D. A. (2020). Using Behavioral Science to help fight the Coronavirus. Journal of Behavioral Public Administration, 3(1).
Myerson, R. B. (2013). Game theory. Harvard university press.
Prati, G., Pietrantoni, L., & Zani, B. (2011). A social‐cognitive model of pandemic influenza H1N1 risk perception and recommended behaviors in Italy. Risk Analysis: An International Journal, 31(4), 645-656.
Rasmusen, E. (1989). Games and information: An introduction to game theory (No. 519.3/R22g). Oxford: Blackwell.
Smits, S. J., & Ally, N. E. (2003). “Thinking the unthinkable”—Leadership’s role in creating behavioral readiness for crisis management. Competitiveness Review: An International Business Journal.
Zhang, J., Wu, W., Zhao, X., & Zhang, W. (2020). Recommended psychological crisis intervention response to the 2019 novel coronavirus pneumonia outbreak in China: a model of West China Hospital. Precision Clinical Medicine, 3(1), 3-8.