3 Shortages and Price Allocation
Jessie Martinez
The Spring of 2020 challenged worldwide markets as they attempted to respond to changing demand requirements as the result of the Coronavirus pandemic. Many markets had shortages such as baking flour packaged for home residential us. While some markets had surpluses such as baking flour packaged for restaurants. Peoples consumption behavior changed as many were restricted or content to stay home to avoid infection. Supply chain issues also created issues with limited worker availability and bottleneck transportation channels. No where was the market mechanisms challenged more than the market for residential toilet paper. According to cottonelle.com the average person uses approximately 85 rolls of toilet paper per year. This number was most likely higher during 2020 with shelter in place orders. On April 19, 2020 nearly half of the grocery stores in the United States were out of stock of toilet paper. How could this happen?
Some pointed to supply chain issues, however, production and distribution were barely disrupted. What did change was the demand. Shelter in place meant people were home and no longer using the facilities at their work place. Residential and commercial toilet paper are different. More people staying at home, coupled with fears of future shortages, caused individuals to panic buy and hoard residential toilet paper. The outsized demand for residential paper swamped the limited inventory that grocery stores keep on premises. Businesses no longer keep huge inventories of expensive product, instead they rely on just in time constant deliveries. After several months, the shortages were for the most part eliminated due mainly to buying behavior returning to normal. The shortages were caused by human buying behavior and not the supply chain.
Questions:
- Why did shortages for toilet paper occur in the spring of 2020?
- Why didn’t the grocery stores simply raise the price to eliminate the shortage?
- How did grocery stores attempt to allocate toilet paper without the price changing? Was it successful in limiting shortages?
- What were some other product shortages that occurred due to changing human consumption behavior during this period?
- Should the government have been more involved in the market to attempt to limit shortages?
Reference:
More, Andrew. (May 2020) How the Coronavirus created a Toilet Paper Shortage. College of Natural Resource News. https://cnr.ncsu.edu/news/2020/05/coronavirus-toilet-paper-shortage/