Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: May, 2024, Volume 15, Issue 2

A Dynamic Model of Rational “Panic Buying”

p. 489-521

Shunya Noda, Kazuhiro Teramoto

This paper analyzes panic buying of storable consumer products accompanied by disasters, using a novel consumer‐search theoretic equilibrium model where consumers follow (S,s) inventory policies. We show that, even if consumers are fully rational, an anticipated temporary increase in consumer shopping costs (as well as conventional demand and supply shocks) can trigger an upward spiral of hoarding demand and result in serious shortages. Due to congestion externalities, panic buying leads to the misallocation of storable products and substantial welfare loss. The model is calibrated using survey data and reveals that the timing of recognizing the shopping‐cost rise is crucial for the severity of panic buying. Some policy options, such as purchase quotas and future sales‐tax reductions, are suggested to mitigate panic buying.

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Supplemental Material

Supplement to "A Dynamic Model of Rational “Panic Buying” "

Shunya Noda and Kazuhiro Teramoto

This supplemental appendix contains material not found within the manuscript.

Supplement to "A Dynamic Model of Rational “Panic Buying” "

Shunya Noda and Kazuhiro Teramoto

The replication package for this paper is available at https://doi.org/10.5281/zenodo.10455236. The Journal checked the data and codes included in the package for their ability to reproduce the results in the paper and approved online appendices.