Proactive Hoarding, Precautionary Buying, and Postdisaster Retail Market Recovery

Abstract

Disasters affect consumers and retailers selling necessities in the market both physically and psychologically. Motivated by various real world scenarios of meteorological disasters such as tropical cyclones, hurricanes, and typhoons caused by global warming, we explore in this article the retail market recovery challenge via studying disaster-induced retailers’ proactive hoarding and consumers’ precautionary buying behaviors under psychological and behavioral uncertainties. We employ real-practice-based empirical data and build game-theoretic model to conduct the analysis. Both the survival-related psychological and behavioral factors and induced precautionary buying behaviors are considered. Our results reveal that a low-degree proactive hoarding by retailers is beneficial to not only alleviating the retail price volatility during a disaster but also increasing retailer's expected profits, thus increasing the net benefit of society (in terms of the cost of demand recovery and the retailers’ expected profit). By contrast, a high-degree hoarding by retailers cannot ensure gaining superior performance for retail recovery. We further investigate the potential of government intervention via managing and controlling the degree of price stickiness to help facilitate postdisaster retail market recovery, and reveal that such a measure may not be a “cure-all.” Instead, a win–win solution for retail market recovery must also rely on the “self-regulation of a society”.