The price of eggs has become the hottest chart in markets, with prices rising 15.5% over the past five years and doubling in just a year. The cause? A bird flu strain that has led to a significant loss of hens, constraining supply and driving up costs. This is not the first time egg prices have seen a surge, but what’s striking is how consumers are reacting – they’re overreacting.
According to data from Purdue University, when egg prices rise, consumers cut back their consumption by two and a half times. This is known as asymmetric demand profile. In contrast, when prices drop, consumers buy more. But why does this happen? The answer lies in loss aversion – the painful feeling of losing something versus the fleeting joy of gaining it.
Research has shown that losses sting twice as badly as gains feel good, leading to irrational behavior in consumers. This is why financial experts emphasize understanding and managing loss aversion to make informed decisions. As egg prices continue to rise, it’s essential for consumers to find ways to cope with this reality, rather than letting emotions dictate their actions.
Grocery stores from coast to coast have already taken action, limiting purchases and implementing surcharges on eggs. Waffle House added a 50-cent surcharge per unit, and Whole Foods in Chicago ran out of eggs entirely. Social media is filled with memes about the crisis, but it’s clear that this issue affects people’s daily lives.
The bird flu strain has had a devastating impact on the industry, with over 100 million hens lost since its outbreak in 2022. As prices continue to rise, consumers will need to find ways to adapt – whether that means exploring alternative protein sources or learning to budget for their egg habit.
Source: https://awealthofcommonsense.com/2025/02/why-are-higher-egg-price-so-painful