Panic Buying

Definition

Panic buying is the act of buying unusually large amounts of a product in anticipation of or after a disaster or perceived disaster, or in anticipation of a large price increase or shortage, as can occur before a blizzard or hurricane or government decree banning a particular popular product, such as incandescent light bulbs. These goods are bought in large amounts to offset a potential shortage or as an act of safety. While panic buying can result in a sudden increase in the cost of goods, it is distinct from looting as it does not entail theft or deliberate property damage.


Panic Buying

What is ‘Panic Buying’

A type of behavior marked by a rapid increase in purchase volume as the price of a good or security increases. Panic buying has the effect of reducing the supply of the good or security, while at the same time driving the price up even higher. This type of behavior is often the result of a feeling of being “left out” if a purchase is not made immediately.

Explaining ‘Panic Buying’

Panic buying may result from a number of different events. A public’s panic buying of a good, such as water or bread, may come as the result of news indicating impending bad weather, as consumers fear a shortage of items as a result of weather-related scarcity.

In the stock market, an investor may see a rapid increase in the price of a security and buy shares out of fear that they will miss out on continued increases. This purchase behavior often results in a suspension of fundamental evaluation, which can result in losses once the market calms down.

Further Reading

  • The Psychological Causes of Panic Buying Following a Health Crisis – www.mdpi.com [PDF]
  • The socio-economic implications of the coronavirus and COVID-19 pandemic: a review – www.sciencedirect.com [PDF]
  • Research on Characteristics of Information Propagation Network of the Mass Unexpected Incident: A Case Analysis of Panic Buying of Candles [J] – en.cnki.com.cn [PDF]
  • Consumer Behaviour during Crises: Preliminary Research on How Coronavirus Has Manifested Consumer Panic Buying, Herd Mentality, Changing Discretionary … – www.mdpi.com [PDF]
  • Information, liquidity, and the (ongoing) panic of 2007 – pubs.aeaweb.org [PDF]
  • A panic-prone pack? The behavior of emerging market mutual funds – link.springer.com [PDF]