Retailer hoarding in emergency situations: A game-theoretic analysis

Abstract

Despite current policies, retailer hoarding continues to occur frequently during specific emergency situations, highlighting the significance of understanding the underlying mechanism. This study employs Stackelberg game models within a two-tier supply chain consisting of a supplier and a retailer to analyse their decisions during persistent emergencies. The models incorporate the interactions between retailer hoarding, consumer panic buying, and incomplete information regarding future conditions. The equilibrium solutions of the models yield the following findings: First, the retailer’s profit-driven hoarding can not only stem from the anticipation of high future prices, but may also be a consequence of price gouging through withholding goods and intensifying consumer panic at present, while insufficient supply does not necessarily imply this behaviour. Second, even with sufficient supply, consumer panic buying may also prompt the retailer to engage in price gouging by reducing the order quantity, which in turn amplifies consumer panic and exacerbates the challenges within the supply chain. Finally, the negative impact of incomplete information in the supply chain is emphasized. In such cases, both parties are advised to adopt conservative estimates of the future price for profit, which, however, can lead to lower sales and impair consumers. These results enrich the theoretical knowledge of retailer hoarding and elucidate the drivers of this irrational and illegal behaviour. They also provide valuable insights, highlighting the importance for regulators to manage consumer panic buying to reduce retailer hoarding as well as promoting precise information disclosure during emergencies.