COVID-19 and Panic Buying: An Examination of the Impact of Behavioural  Biases

Abstract

COVID-19 pandemic has created havoc around the globe since it first started infecting humans in December 2019. It has not only created a significant health and economic crisis for the world but also caused unusual individual behaviours such as panic buying all around the world. At the outset, the rationality behind these abnormal behaviours is hard to explain as such behaviours are naturally irrational. Thus, this study attempted to explain individual behaviours observed in various countries through the theoretical lens of several established behavioural theories to make a recommendation for changing people’s behaviour during a future pandemic. Taking a quantitative approach with a comprehensive review of recent literature and using secondary data from online sources, the study analysed people’s behaviours in numerous countries using several behavioural theories. The study found that excessive information, sometimes rumours and misinformation, circulated through social and news media had played a significant role in the unprecedented panic buying observed around the world. As explained in behavioural theories, during a pandemic, people are compelled to make quick decisions and to take actions to subside their negative emotions, such as fear and anxiety so that they feel better and safe. In doing so, people use their heuristics or mental shortcuts which leads to panic buying behaviours. More specifically, the behaviours such as affect heuristic, availability heuristic, loss aversion, regret aversion, risk aversion, framing, hoarding, herding and bandwagon effect had primarily contributed to the panic buying occurred during the COVID-19 pandemic. Finally, based on the findings, the study made several recommendations to stakeholders so that they would be able to make people better prepared for a future pandemic.

Keywords: COVID-19, Panic buying, Behavioural biases, Psychology