Salience and medication panic buying

Abstract

We study the health risks associated with pandemics as a causal channel causing medication panic buying. Using a unique administrative dataset from March 2018 to March 2020 covering 1.4 million patients in 314 primary community hospitals in a major Chinese city, as well as a difference-in-differences approach, we find that the COVID-19-related health risks led to hospital expenditure exceeding normal levels by 18.7%. This increase was primarily driven by a significant rise in medication expenses, which surpassed normal levels by 29.2%. We further explore three possible mechanisms of bottom-up attention, contrasting, surprising, and prominent stimuli, and demonstrate that they are the key channels through which the salience effect causes panic buying.