Information Cascades and the Lockdown Toilet Paper Shortage
When the coronavirus began its rapid spread in the spring, the U.S. went on lockdown. People were told to stay home and only leave if necessary. Shelter in place orders were expected to last for months, causing a wave of consumers to panic buy household goods. Toilet paper in particular was a target of mass buying and there were shortages across the country. Rows of empty shelves could be seen in stores along with quickly rising toilet paper prices. In fact, Americans spent $1.4 billion on toilet paper in just four weeks, according to The Washington Post. The panic buying of toilet paper can be explained by an information cascade.
An information cascade is an instance where people copy the behaviors of others because others may know information that they don’t. People learn from the behaviors of others and believe that they will be able to get a greater benefit if they follow the crowd. In an information cascade, people follow the crowd even if their actions go against their own information or inclinations. This leads to a wave of people with the same behavior.
This can be shown in terms of coronavirus lockdown toilet paper buying. For example, let there be person 1 and 2 who buy large amounts of toilet paper in preparation to be home during the pandemic. They may be afraid and guess that there will not be toilet paper when they need it. Person 3 sees person 1 and 2 buying large amounts of toilet paper. This will cause person 3 to buy more toilet paper as well, as he can infer that person 1 and 2 know more about toilet paper and the pandemic than he does. Any further guesses after person 1 and 2 do not convey any extra information since people are following the crowd. Person 4 sees the three people before him buying large amounts of toilet paper and follows suit. This situation repeats itself and consumers become increasingly nervous and anxious. Widespread and publicized media coverage only reinforces this notion. There is a cascade and soon everyone is buying excessive amounts of toilet paper. The resulting demand from panic buying has led to toilet paper stocks being depleted. Unfortunately, the information cascade has only increased the severity of the pandemic, further affecting the lives of millions of Americans.
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