Over the past couple of weeks, I’ve heard a steady chorus of people lamenting the crazy-ness of people panic buying toilet paper. But if you pause to think it through, the reasoning for stockpiling are rather simple and don’t rely on craziness or irrationality at all.
On the store side, toilet paper is very cheap but takes up a lot of space, so in a typical grocery store, there are not many units out on the shelves compared to other smaller products. Because the sales of TP are typically steady, they don’t stock a ton of extra supply in the limited additional storage space they have.
On the consumer side, TP is cheap and doesn’t go bad. Most people don’t buy one years worth of TP all at once because it is an annoyance to get it from the store to your home, but once it is in your home, having a large stockpile is actually kind of nice.
The downside to having a lot of toilet paper stocked up at home is almost non-existent and during a pandemic going to the grocery store has a significant potential cost (catching the virus). So limiting your trips to the grocery store makes complete sense.
Buying your essentials in volume and then not going back to the store for a while is completely logical during a panic. Combine that with the low availability in the typical store, low price, and potential discomfort of not being able to get TP in the future and it becomes completely rational to stock up (or at least to expect to see empty shelves).
In a properly functioning market, price increases limit demand and ensure supply for those who need a product or service. Anti-price-gouging laws (or the threat of anti-price-gouging laws) keep stores from raising prices and limiting demand, which makes it all the more rational to stockpile when you can.
The same is true of all the other products you are seeing stores sell out of (pasta, soups, cleaning supplies, non-perishables). The costs are low and the potential rewards are high so it makes sense to stockpile.
If prices go up for these high-demand products, stores will be able to keep them in stock for the people that need them the most and producers will have a stronger incentive to increase supply.
If they continue threatening and implementing price-controls they will continue to suppress supply and prop up the demand of toilet paper and all the other products stores can’t keep in stock during this crisis.
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