A) You will note that I changed the example to "water" specifically because there was
NO possibility that water was going to be an issue. And yet there was
still panic and shortages, mostly due to reporting.
B) The press reported toilet paper was flying off the shelves. Except that before they did that, there were only marginal shortages in certain places, mostly because toilet paper is bulky and slow to restock. After the reporting, it was out everywhere instantly. In this instance, that did great harm to those who couldn't just "stock and store".
C) "Arguably, an equally if not more effective solution would be to restrict to the number of units a customer could buy at once."
Sadly, this doesn't actually work. If most people buy toilet paper once a week, a shift to once every 5 days is way more than enough to cause a supply chain shock. There is no way to enforce a consumption level that wouldn't supply chain shock once the panic got started.