What Is a Market Run?

Also known as a run on the market, a market run is a situation in which consumers choose to increase their purchasing of certain goods and services due to some perceived threat that the supply of those products will shortly be diminished. In some cases, the triggering of this type of run will actually serve to create the very situation that consumers feared would come to pass. As more people buy all the available supply, other consumers are left with demand but no supply, which in turn triggers an even greater demand that suppliers cannot meet in the short-term.

One of the more common reasons for a market run is a fear among consumers that some upcoming event will inhibit the access to certain goods and services, at least for a period of time. For example, consumers are highly likely to increase their purchases of items like bottled water, batteries and canned goods when there is the threat of an impending natural disaster that is likely to cut off supplies from grocery stores. As a result, supermarkets may find it difficult to keep up with the sudden high demand for certain products. When consumers begin to notice empty shelves, this in turn creates the urge to buy whatever products remain that could possibly be of some use.

The same general concept of a market run can also occur when consumers perceive that an adverse shift in the economy is about to occur or has already occurred. One of the best examples is the bank run. In this particular type of market run, consumers begin to withdraw resources from various types of bank accounts and hoard the cash at home. The idea is that if the banks should fail, at least the cash would be available to continue making essential purchases until the crisis is abated. The outcome of a bank run is that the impending financial crisis is usually hastened as a result of that run, possibly making the situation worse than it would have been otherwise.

Attempting to avoid or at least minimize the impact of a market run is often the goal of many businesses and financial institutions. This is sometimes managed by temporarily increasing inventories when there is an expectation of a run. A supermarket manager who knows from past experience which goods consumers will buy in bulk just before a hurricane is likely to authorize orders for larger quantity of those products, effectively making it possible to deal with the increased demand in the short-term. Governments may also utilize various strategies to reassure consumers that banks and other financial institutions will remain open even as the economy enters a period of recession or depression, which in turn helps to reduce the likelihood of a bank run and prevent consumer behavior from making the situation worse.