It is that time of year again: ice skating, cold, clear blue skies, fairy lights decorating Oxford Street, and fears about having enough Christmas toys on the shelves.
There are two key themes to this year’s scare stories. First, supply problems could lead to a deluge of children missing out on the most popular toys. Second, even if you get your hands on what your toddler wants: get ready to pay through the nose for it.
Often the two are combined, with retailers being accused of price gouging, or of taking advantage of shortages.
There is a kernel of truth in both the price increases and shortages; there are very real challenges in the global supply chain, which are not just confined to the UK.
But we have been here before. In fact, we are here almost every Christmas.
The prices of the most popular toys, particularly on sites such as eBay, rocket, as parents desperately try to acquire whatever has become the ne plus ultra of the moment.
Four years ago, so-called Grinch bots were accused of stealing Christmas by gobbling up stock of the most sought after toys before selling them on at inflated prices.
That year, the Fingerlings toy monkey was a favourite. Leading retailers ran out of stock completely, and the list price of £14.99 was stratospherically passed on eBay, with deals being struck for £200.
Way back in 2002, it was reported that six of the top ten most wanted toys that year were in short supply, with no prospect of further deliveries from manufacturers across Asia. That time, one piece in The Times claimed this had happened for the last seven consecutive years.
These stories praying on parents’ worst fears of being empty-handed on December 25 have become a yearly occurrence as traditional as the tree and the pudding.
Like the decorations, every year will have its own set of new features. But the regularity of the shortages must mean there is an underlying explanation.
The key feature of the Christmas toy dilemma is that demand is not primarily determined by the prices or quality of the alternatives on offer. What really matters is popularity; every child wants the toy of the moment.
In 1973, the polymath and economic Nobel Laureate Thomas Schelling developed a theoretical model on markets such as these. His paper had the splendid title, “Hockey helmets, concealed weapons and daylight saving”. It was inspired, as many of the best things are, by misadventure.
This time, a star ice hockey player had suffered serious head injuries from a flying puck. Neither he, nor his teammates were wearing helmets. When asked, in the aftermath of the accident, why none of them wore more protection, even when they knew the risks, one answered: “I don’t because the other guys don’t”.
Schelling crystallised this into a mathematical concept he called “binary choice with externalities”. The choice facing an individual is binary: either you wear a helmet or you don’t but your choice affects how other people in your peer group make their choices.
We’ve seen this cycle repeated in the worst of the panic buying of the pandemic and petrol crisis. One person buys a little more, and another, who sees the queues at the station, does too.
In other words, there’s no need to panic about Christmas shortages. They’re a part of the festive calendar as regular as the Boxing Day hangover. No amount of complaining or regulation will ever change that.