Game Theory and the Toilet Paper Shortage of 2020
Empty supermarket shelves in Belfast. Liam McBurney/PA Wire/PA Images
When COVID-19 began its Reign of Terror in the Spring of 2020, stores across the globe experienced an acute shortage of essential supplies. As Chris Stiff writes in his article in The Conversation, everyday products like toilet paper reached sky-high prices on eBay, empty shelves at grocery stores became commonplace, and supermarket brawl videos started going viral on social media. At a time when society ought to unite in its battle against a deadly virus, people resorted to panic buying. Why did we behave in a such manner? Well, Game Theory might have an explanation.
Chris Stiff explains how the decision to buy supplies in a socially responsible manner or to hoard them, is related to game theory. “The approach is based around the understanding that our pay-off in some situations is based not only on what we do, but on what others do too.” He adds, “For example, getting the food we want from a supermarket is dependent on us and all (or most) other shoppers acting sensibly. If we decide to be socially responsible, that is of little effect if others decide to panic buy.”
In the second week of class, we were introduced to the concept of Game Theory with the Prisoner’s Dilemma – a paradox in which two individuals acting in their own self-interests do not produce the optimal outcome. The phenomenon of panic buying can be explained using exactly this concept and Nash Equilibrium which states that each player’s strategy is optimal when considering the decisions of other players. The setup of the game goes as follows: the two players are you and everyone else and the two strategies are panic buy or act normally. Each strategy has an associated pay-off. If everyone acts normally, we have an equilibrium where there is toilet paper on the shelves, and people can relax and buy it as they need it. This is successful coordination. However, if others panic buy, the optimal strategy for you is to do the same, otherwise, you’ll be left without toilet paper. Since everyone has the same strategies and pay-offs, others will panic buy if you do. The result is another equilibrium where everyone panic buys, resulting in a coordination failure.
So what’s the solution? Stiff notes that promoting discussion and conversation often improves relationships amongst people in game theory-type situations as we see in the Prisoner’s Dilemma. A drastic measure could be punitive action as long as the punishment is strong enough to be a deterrent. Else, it might encourage the selfish behaviour once people realise the cost/benefit analysis works in their favor.
Read Stiff’s article for some more solutions!