Psychology behind worth surges

On September 19, U.S. President Donald Trump signed a proclamation elevating the annual charge for H-1B visas to a staggering $1,00,000 a 12 months. Almost immediately, immigration attorneys and companies equivalent to Microsoft and Amazon suggested H-1B visa-holding workers outdoors U.S. to return earlier than the proclamation kicked in on September 21.

Many visa holders rushed to guide flights and several other journey brokers noticed a pointy surge in last-minute bookings to the U.S. The sudden panic-driven demand pushed ticket costs greater, illustrating a textbook case of fomoflation: a phenomenon whereby Fear Of Missing Out (FOMO) coupled with surging demand resulted in fast flight ticket inflation.

For occasion, a passenger secured a one-way ticket to Dallas on Qatar Airways spending about $2,000, which is greater than twice the price of unique round-trip fare.

How Fomoflation operates

Another instance of Fomoflation is Sri Lanka’s financial disaster of 2022. Triggered by near-depletion of international alternate reserves, the nation confronted acute gas shortages, forcing the federal government to repeatedly increase petrol and diesel costs. What adopted quickly was panic shopping for and folks began hoarding petrol. This FOMO-driven rush pushed costs even greater. The cycle of panic-driven demand and resultant worth surges illustrates how Fomoflation operates. Unlike regular inflation, which is an final result of macroeconomic components, Fomoflation arises from behavioral psychology, typically amplified by social media.

In brief, Fomoflation happens when client behaviour (demand psychology) and market or provide pressures mix to create fast inflation even in necessities, the place costs rise sooner than underlying financial components would justify.

Fomoflation can be seen in client items. For instance, throughout festive seasons, demand for staples equivalent to pulses and cooking oil spikes after media experiences spotlight potential shortages or worth hikes. Influenced by the experiences, customers rush to fill up, pushing costs greater even when provide is ample. Therefore, it’s the worry of ‘shortage’ or the FOMO which triggers shopping for frenzy, setting off an ‘synthetic demand’ loop and eventual worth rises.

Dealing with Fomoflation

Consumers might defend themselves from its results by staying alert to the behavioral triggers that drive it. Find out if shopping for choices are influenced by FOMO, media experiences or social strain. Understand if there’s a actual want for the merchandise. Plan purchases forward and keep away from last-minute rushes, particularly throughout festive seasons. Try to keep up a small buffer of necessities at house so that you just don’t have to reply immediately to each perceived scarcity. You can even examine costs throughout shops and on-line platforms to keep away from paying inflated charges. For bigger purchases/investments, analyse and analysis if worth motion is justified or hype-driven.

Key is stability

By staying affected person, knowledgeable and disciplined, you’ll be able to break the loop of ‘synthetic demand’ and keep away from inflated costs. Allow time for the state of affairs to settle.

For occasion, in H-1B visa charge proclamation, travellers who waited would have realised the $1,00,000 charge utilized solely to new candidates. Those who rushed to guide flights allowed FOMO to drive costs greater.

In circumstances like Sri Lanka’s gas scarcity, endurance alone wouldn’t assist. The secret’s stability: mix endurance with knowledgeable, proactive motion. Assess if the shortage is actual, exaggerated, or pushed by hype and act judiciously. Then, you’ll be able to keep away from paying FOMO-inflated costs.

(The author is an NISM & CRISIL-certified Wealth Manager and licensed in NISM’s Research Analyst module)