Panic Purchases During Crises

Andras Niedemayer (Cergy University)

September 20, 2021, 14:00–15:30

Room 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.