How much is the share of rumors in the price?

Although in economics, the market is affected by the path of real supply and demand, but the role of components such as expectations, concerns and information that circulates between economic actors and consumers cannot be ignored.

According to Ambassador Arjan, in certain economic conditions, the publication of an unconfirmed news about the shortage of goods, stoppage of imports or imminent increase in prices, sometimes affects the behavior of buyers and sellers before a change in economic realities has occurred. The result of this cycle can be a sudden increase in demand, disruption of distribution, intensification of price fluctuations and weakening of public confidence; A situation in which the rumor is not only a reflection of market concerns, but also an effective factor in aggravating them.

In the analysis of market developments, usually variables such as exchange rate, production cost, import amount, supply volume, purchasing power and market regulation policies are in the focus of attention. However, a less tangible factor can also influence economic behavior: the information on which people and economic actors make decisions about the future.

A consumer who thinks that a product will become scarce or expensive in the coming days, may postpone his purchase or buy more than his daily needs. A seller faced with a flurry of unconfirmed news about a price increase may be more cautious about restocking, timing or pricing. The wholesaler may also refuse to supply goods quickly while waiting for the clarification of the market situation. Of course, all these behaviors are not necessarily caused by rumors and may be formed based on previous experiences or real market signals. The problem begins where incomplete, unsourced or inaccurate information replaces reliable data and economic decisions are made based on an unrealistic picture of the future.

In such a situation, the market faces a phenomenon that can be called the "rumor economic effect"; An effect that may change the behavior of the supplier and the demand even without an immediate change in the amount of production or import.

How can a rumor become a market reality?

Let's say unverified news about an impending shortage of an essential commodity spreads on social media. A part of consumers are increasing their purchases by worrying about not having access to the goods in the coming days. Stores are experiencing higher-than-normal demand, and some units are running out of inventory faster than expected. Next, images of empty shelves or messages about the difficulty of buying the same item are published. These images, even if they are only from a few stores or a limited area, may be interpreted as a sign of a widespread shortage. More people start shopping and the pressure on the distribution network increases.

In this way, the news that did not have enough support at the beginning, can change people's behavior and become a factor for creating local shortages or aggravating the disruption of distribution. In this cycle, the observation of scarcity may also be mistaken as confirmation of the original news. Of course, the formation of such a cycle in every market is not certain and depends on factors such as the possibility of product substitution, the amount of reserves, the speed of resupply, the distribution capacity and the extent of the news. However, this mechanism shows why checking false news in the market is not only a media issue and can be related to demand management and economic stability.

From psychological inflammation to economic cost

The consequences of market rumors are not limited to empty shelves or temporary increases in demand. This phenomenon can impose costs on different links of the supply chain. For the consumer, the first consequence may be buying early, accumulating goods and allocating a larger part of the household budget to unnecessary purchases. In a situation where purchasing power is limited, such behavior can consume the household's financial resources prematurely and increase the concern of meeting future needs.

For trade unions, a sudden change in the demand pattern leads to the difficulty of planning for resupply, increasing customer referrals, and facing unrealistic expectations about the price and stock of goods. If false information about a store's performance or pricing is published, that business's reputation can also be damaged; Even if the falsehood of the news is revealed later.

At the distribution network level, unanticipated demand can damage inventory and distribution planning. In markets where supply capacity is limited or replacement of goods is not possible quickly, conditions may take time to return to normal.

On the other hand, the repetition of false news can reduce public trust in official announcements, expert reports, and even reliable information from market participants. In such an environment, denying a rumor is not necessarily enough to restore trust; Especially if the notification is delayed or people remember previous experiences of shortages and price fluctuations.

Is rumor always the source of price?

The answer to this question requires a distinction between simultaneity and cause and effect relationship. Any price increase after the publication of a news is not necessarily the result of that news. An increase in the exchange rate, an increase in the cost of production, a disruption in imports, a decrease in supply, or a change in trade policies may have occurred at the same time as the rumor spread.

In some cases, rumors can help to exacerbate volatility or increase demand pressure; In other cases, it simply reflects concerns rooted in the actual state of the economy. Sometimes even a worrying news, if it is documented and accurate, is considered a necessary warning for timely decision making. Therefore, the main issue is not simply the negativity of a news or causing concern in society; An important criterion is the validity of the information, its compliance with reality and the way it is presented.

A documented warning about the possibility of a shortage is different from a definite and unsubstantiated claim about the cessation of supply. Just as hasty denial of a real concern can also lead to a decline in public trust.

In order to determine the share of rumors in market developments, the trend of news release should be compared with data such as price changes, inventory, sales volume, supply orders and response time of responsible institutions. Without such evidence, attributing price increases or shortages to a particular news story is more of a hypothesis than a proven conclusion.

Sensitive markets, prone to faster reactions

The impact of false news is not the same in all markets. The commodity market may be vulnerable to rumors of shortages due to its direct relationship with daily household needs and people's sensitivity to food security. In this area, buying more than needed can make it more difficult for other consumers to access the product.

In the gold and foreign exchange market, expectations about political, economic developments and future policies can affect buying and selling decisions. The release of unconfirmed information and speculation about sanctions, trade restrictions or economic decisions may change the behavior of traders; However, the direction and extent of its influence also depends on the fundamental conditions of the market.

In the market of spare parts, imported goods and some durable products, the news related to the stop of imports, the restriction of currency allocation or the increase of supply costs can affect the decision of buyers and sellers. For example, if the consumer believes that a piece will become scarce in the future, he may postpone its purchase; A behavior that, if widely repeated, can increase short-term demand.

The common denominator of these markets is that the more difficult it is to access accurate and timely information and the more sensitive economic decisions are to future developments, the stronger the ground for the impact of incomplete and unconfirmed news.

guilds; An important link in recognizing market realities

In examining the role of rumors in the economy, the position of guilds is particularly important. Trade units are in direct contact with consumers and observe changes in purchasing behavior, the amount of references, local shortages and changes in demand at the market level. For example, for the first time in the country, since May 2019, the Chamber of Guilds of Iran has implemented a comprehensive plan for the retail sector, the results of which will be published monthly.

Shamkh is a monthly index to measure the state of business activity, which is calculated based on the answers of economic operators to a series of questions about the state of their business. Therefore, the ratio shows the speed of change of business conditions rather than the exact size of sales or production.

Trade unions can also provide the responsible institutions with a more accurate picture of the supply and demand situation by aggregating these observations. This capacity will be effective when field information is collected from specific routes and compared with valid data. A trade unit's report of a sudden increase in demand is not enough to prove a shortage at the city or country level; But if such reports are collected from several regions and matched with inventory and distribution statistics, they can help identify potential disruptions early.

On the other hand, accurate information of the trade unions about the supply situation, the distribution method and the real market conditions can help to reduce uncertainty. Of course, this role should not be limited to publishing general and unsupported denials. The information provided to the public should be clear, verifiable and relevant to the actual scope of the problem.

Therefore, creating a mechanism to receive field reports, investigate frequent claims and quickly transfer documented information to the relevant authorities can be part of the management solution of guilds and market trustees; Especially during periods when the market is affected by political developments, trade restrictions or supply concerns.

Dealing with rumors goes through the path of transparency

Countering fake news cannot be limited to post-publication denials. The longer the gap between the occurrence of an economic transformation and the publication of reliable information about it, the more opportunity is provided for the formation of unverified narratives. Regularly releasing data on the supply status of essential commodities, clearly explaining decisions affecting the market, accurately announcing the extent and duration of possible disruptions, and providing verifiable information about prices can help reduce uncertainty. In contrast, vague, inconsistent, or late announcements may be issued even with the intention of calming the market, but in practice fail to address public concern.

The media also have an important responsibility in this regard. Separating confirmed news from claims, specifying the source of information, avoiding republishing emotional messages, and clearly correcting false information are among the measures that can reduce the possibility of rumors spreading. The speed of spreading the news, if it is not accompanied by accuracy and verification, may impose more costs on the society.

Along with these actions, it is necessary to distinguish between responsible communication about real risks and hiding market problems. Transparency does not mean denying shortages or price fluctuations; Rather, it means presenting an accurate picture of the problem, explaining its causes, and clarifying the actions that are being taken to manage the situation.

Trust, part of the infrastructure of market stability

Rumors and false news cannot replace the fundamental factors of the economy; But we cannot ignore their role in changing the expectations and behavior of market participants. Incorrect information may create emotional demand in some situations, intensify existing disorders and increase the cost of decision-making for consumers and trade unions.

However, attributing any fluctuations or shortfalls to rumors, without examining the evidence itself, can lead to incorrect analysis. The solution is neither to exaggerate the power of rumor nor to ignore its effect; Rather, it is to accurately identify the mechanisms of influencing information on the market and strengthen the tools to deal with false information.

Market stability does not only depend on adequate supply of goods and price monitoring; Access to reliable information, effective communication between responsible institutions and union activists, and public trust also play a role in this. The clearer and more timely the facts of the market are provided to the people, the less space is left for rumors to spread.

Finally, market management is not complete without information flow management; Because sometimes what changes the behavior of the buyer and the seller is not the actual lack of goods, but the image that is formed in their minds of its future.