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Home » ECONOMICS & MARKET INTELLIGENCE: When hoarding mentality invades a stock market

ECONOMICS & MARKET INTELLIGENCE: When hoarding mentality invades a stock market

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AS Covid-19 social distancing measures are slowly being relaxed and formal businesses have resumed operations, one reality that has caught up with ordinary Zimbabwean citizens are fuel shortages.
Queues at fuel stations have become a common feature despite some phoney pronouncements now and then that the country has adequate fuel stocks.
While it could make sense for merchants in Zimbabwe to understand the queueing theory, which is a branch of operations research that examines every component of “waiting in line”, a major area of concern has been the corruption at fuel stations.
Petrol attendants have become the new cash lords, profiteering through bribes particularly from those who want to “jump the queue” or make use of drums and jerry-cans.
That said, the basic point is that queues form because resources are limited.
Zimbabwe has also experienced episodes of basic food stuff shortages (cooking oil, mealie-meal and flour) and this has sometimes led to rationing, which is basically the limiting of goods or services that are in high demand and short supply.

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In the case of fuel, some service stations have resorted to a maximum of 20 litres of petrol or 40 litres of diesel per vehicle to ensure some form of “fair distribution” among customers.
In behavioural economics, we learn that economic agents react to shortages by embracing a hoarding mentality.
Consumers tend to hoard commodities when there are fears of scarcity.
Hoarding is the practice of obtaining and holding resources in quantities greater than needed for one’s immediate use.
This behaviour is a common response to fear, whether fear of imminent societal collapse or a simple fear of a shortage of some good.
Economic hardships may lead people to collect foodstuffs, water, petrol and other essentials which they believe, rightly or wrongly, may soon be in short supply.
A feature of hoarding is that it leads to an inefficient distribution of scarce resources, making the scarcity even more of a problem.
Another interesting global case study relates to the hoarding of surgical masks given the emergence of the coronavirus. It is estimated that China made half the world’s masks before the coronavirus emerged there.
In addition, it has since expanded production nearly 12-fold since the outbreak but has claimed mask factory output for itself. As a result, worries about mask supplies are rising.
Further, as the virus spreads, governments around the world are restricting exports of protective gear, which experts say could worsen the pandemic.

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