Panic Purchases During Crises

Andras Niedemayer (Cergy University)

20 septembre 2021, 14h00–15h30

Salle A4

Industrial Organization seminar


This paper analyzes panic purchases of goods after demand changes due to an unexpected event such as a pandemic. Our two-period model incorporates capacity constraints by sellers and search/shopping costs by consumers. Even if sellers have enough capacity to satisfy total demand, there may be shortages because consumers panic purchase (i.e. buy the good in period 1 before knowing whether they will need it). Shortages can hence be a self-fulfilling prophecy: consumers inefficiently panic purchase in expectation of shortages. The paper analyzes various measures taken against panic purchasing, such as price caps, rationing, information policy, and restrictions on resellers.