Making Decisions During a Pandemic

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Economy

Nepal is getting ready to face one of the most powerful pandemic in its history. The nation has been on a lockdown since March 22, 2020 as a preventive measure against the spread of Coronavirus. While every individual, company and city is preparing for the worst, our chance for safety lies in staying at home and stocking essential supplies.

Our fear towards demand-driven scarcity during these times are natural, but it decreases our capacity to think pragmatically. The zero-risk bias is a tendency to completely eliminate a problem by doing (in this case, purchasing) more than needed, even if doing only enough reduces risk significantly. This tendency can be observed currently among individuals in the USA, UK and many other countries. It leads to irrational hoarding, which can have a psychological impact on others who don’t, leading them to feel insecure about their own purchasing decisions and then to hoard as well. People have been hoarding essential supplies like toilet paper and canned goods which leave supermarkets completely, but temporarily empty. 

Coming back to Nepal, with the recent surfacing of the 5th Coronavirus case in the country, people might be tempted to overstock their Personal Protective Equipments or PPEs like masks, hand sanitizers, handwashes, etc. assuming that the worst is bound to happen. However, such panic-buying can lead to some dangerous situations that we have already observed in other countries : lack of supplies for health sectors, inability of the elderly to find enough supplies for themselves and an unnecessary disturbance in the value chain of these products. 

It can also unconsciously indulge us in overusing a product. Suddenly four drops of sanitizer feels right than just two, because you have 20 bottles of them stocked up. 

If staying at home is the best way to reduce health risk, the best way to reduce supply risk would be to avoid these hoarding habits. Picking up every single sanitizer or mask left in your local mart may be very tempting at this point, but leaving some behind can psychologically eliminate a possible panic over scarcity. The Game Theory itself explains that if everyone buys only what they need, there will be enough for everyone. 

But if people start panic buying, the optimal strategy for everyone else would be to do the same. 

Government as well as private sectors also need to gain the confidence of consumers, assuring that supplies will be available even during the worst of the situations. Simple measures like designing a structural supply chain with less manpower, creation of business continuity plans or consideration of alternative and convenient resources can assure the availability and accessibility of PPEs during the times of lockdown, curfew or even a national emergency.

Let’s put aside our “better safe than sorry” instincts and switch to making reasonable decisions. Purchase items that are necessary, enough, and upto a practical quantity. Our country has had the advantage of facing the pandemic slowly and not all at once, and pooling essential supplies to reduce risks of the Coronavirus Outbreak is the way to go, health-wise or economy-wise.