Scarcity and Coronavirus

Abstract

In March 2020, when COVID-19 was labeled a pandemic by the World Health Organization, store shelves were emptied of hand sanitizer, disinfectant wipes, and toilet paper. Newspaper headlines documented shortages of these products and announced closures of nonessential businesses. Restaurants, hotels, department stores, and childcare centers temporarily closed their doors, leaving many hourly workers unemployed. Without regular paychecks coming in, resources became scarce for many families. Within a matter of weeks, COVID-19 had caused widespread scarcity—scarcity of products, scarcity of services, and scarcity of resources—for millions of consumers all over the world. Clearly, the effects of such widespread scarcity of products, services, and resources will be long-lasting and complex. Although the COVID-19 crisis is itself unprecedented, there are several valuable insights we can draw from prior research on scarcity to understand consumers’ reactions to the crisis and potentially inform policy developed in response to the crisis. In the following sections, I highlight findings from prior research, discuss how they inform public policy, and propose ideas for future research. How do consumers react to scarcity, and do their immediate reactions differ from their longer-term reactions? Scarcity of either products or resources quickly attracts our attention (Mullainathan and Shafir 2013). Indeed, scarcity is often used by marketers to make products seem more desirable, as in “exclusive” or “limited time only” offers (Cialdini 1993). Learning about the scarcity of hand sanitizer, disinfectant wipes, and toilet paper further increased demand for these products. Yet, later in the consumer journey, consumers may respond to scarcity by consuming products and resources more thoughtfully and creatively (Hamilton et al. 2019). Consumers forced to cook at home began sharing recipes online. Faced with shortages of N95 masks used by health care workers, people began fashioning their own masks using old T-shirts and sewing masks to donate to first responders. From a marketing perspective, the substitutions prompted by scarcity of products, services, and resources may have longterm effects on consumer habits, behavior, and brand loyalty. Scarcity prompts substitution in both consumption and production processes (Hamilton et al. 2014). Stockout of a favorite brand may prompt a consumer to try a new brand, establishing new loyalties. Closure of a health club may motivate consumers to establish new workout routines. With childcare facilities closed, parents substitute other resources, such as their own time, for the money usually spent on childcare. In all of these cases, substitution erodes loyalty to brands, products, and service providers; this erosion may be more severe due to the other changes in consumers’ daily habits and routines caused by COVID-19. Although many product and service scarcities created by COVID-19 are shared by consumers of high and low socioeconomic status (SES), there are also important differences. While online retailers eliminate the geographic restrictions of offline retail, they still restrict consumers based on access to credit and digital literacy. High-SES consumers may react to scarcity at their local stores by finding items online and stocking up, exacerbating scarcity, while those with less disposable income, less access to credit, and smaller living spaces cannot afford to hoard. Even mental resources are taxed by scarcity (Mullainathan and Shafir 2013). Low-SES consumers, whose resources are already strained, may find it more difficult to evaluate options and make effective substitutions. Scarcity experienced during the current pandemic may have a lasting effect on consumers, especially if it occurs during formative years. Experiencing (vs. not experiencing) chronic scarcity can foster different models of the self, or “socioeconomic cultures,” that continue to shape consumers’ responses (Markus and Conner 2013). Those with high SES tend to interpret agency as exerting control over the environment, whereas those with low SES interpret agency as actively adapting to the environment and bringing themselves into line with environmental forces (Markus and Conner 2013). For example, interviews with survivors of Hurricane Katrina in 2005 who left the area before the storm, who tended to have higher SES, emphasized the degree to which they had exercised independence and control by choosing to leave. In contrast, those who stayed in New Orleans during the storm, who tended to have lower SES, emphasized exerting strength in the face of a challenge and not giving up (Stephens et al. 2009). We may