In stores and pharmacies across Sweden, there are gaping holes where there should be toilet paper, pasta and paracetamol. Customers report having to go from store to store in search of a single roll. The rise in cases of COVID-19, especially in the large cities, has customers scrambling to stock up on essentials – despite reports from producers that there is no shortage of any of them. So why are we acting as if there was?
Rational or irrational?
“There is sometimes a rationale behind stockpiling”, explains Professor Richard Wahlund, whose research focuses on consumer behavior and economic psychology. “This is when people firmly believe that there will be a shortage of something they really need, whether it be medicine, food or toilette paper. This rationale is in turn often influenced by psychological factors, making some people stockpile more than others, and some not at all, despite having the same needs.”
Then there is irrational stockpiling, when there is no real shortage in sight, or no necessity of the things stockpiled. Like toilet paper, Wahlund expands. Panic buying started in Hong Kong as early as February and then spread across Asia, Europe and the US. In Hong Kong it got so bad that a gang of armed robbers stole 600 rolls of toilet paper. Hoarders in various countries have got into physical altercations over the precious material. An Australian tabloid printed extra blank papers to be used in case of an emergency.
With expansive forests, pulp factories and domestic papermills in full swing, Swedes have no real reason to fear running out of that basic essential – while we might very well run out of other products. And we still see plenty of stockpiling. One explanatory factor is time preferences.
Planning ahead or living in the present?
“Positive time preferences mean that people favor consumption now – at present – before later on, while those with negative time preferences favor consumption in the future before now. Most people are somewhere in between,” Wahlund explains.
He continues: “In short, future-minded people, having negative time preferences, tend to plan ahead and invest more in for example education, housing or savings. Since planning ahead requires some knowledge, they tend to actively seek out information, not least from reliable news media. When they foresee a shortage of certain products it can lead to stockpiling. But if they don’t believe the indications are reliable, they will stockpile less.”
People with strong positive time preferences, on the other hand, live more in the present. They are more likely to live hand to mouth, planning and saving less. They’re generally less inclined to stockpiling, Richard Wahlund explains.
“However, among the things they may consume is social media. If there are a lot of news or rumors about possible shortages and need for stockpiling, this may influence them in their decisions. For example the stories from Hong Kong and Australia, extensively shared on social media.“
We really hate to lose
Other explanations to stockpiling are loss aversion and herd behavior. Loss aversion means that people, in general, react more to losses than to gains.
“We hate and try to avoid losses more than we love and try to win corresponding gains,” Wahlund says. “Something activating loss aversion is if we perceive scarcity of something. And that is exactly what happens when we see empty shelves in the store, activating a feeling of missing out of the products that are not there anymore. In other words, to lose the opportunity to consume these products.”
In an uncertain situation, humans also tend to look at others in our “herd” – our own community – for hints on what to do and how to behave, believing that others know something we don’t. Empty shelves and stories on social media are examples of such hints. When many people are imitating others’ behavior, herd behavior arises.
“It may have started as a butterfly effect,” Richard Wahlund says. “But it’s a hoax.”
You see articles and memes about running out of toilet paper, your neighbor is hauling home a load of it and the shelves in the store are empty, and you might very well come to the conclusion that there is a shortage. You share the memes yourself. And once the shelves fill up, you’ll buy a load yourself – and empty those shelves for the next customer in the process.
“Something that may still enhance the tendency to stockpile is that we have got used to the society taking care of common problems, leaving us to just take care of our very own. You may call that egoism, but we may have learnt it from how our society is organized. If so, it’s really sad,” Richard Wahlund finishes.