Static and dynamic inefficiencies in an optimizing model of epidemics

Several externalities arise when agents shield optimally to avoid infection during an epidemic. We classify externalities into static and dynamic and compare the decentralized and optimal solutions when agents derive utility from social interaction. For low infection costs agents shield too little;...

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Bibliographic Details
Published inEconomic theory Vol. 77; no. 1-2; pp. 9 - 48
Main Authors Garibaldi, Pietro, Moen, Espen R., Pissarides, Christopher A.
Format Journal Article
LanguageEnglish
Published Berlin/Heidelberg Springer Berlin Heidelberg 01.02.2024
Springer Nature B.V
Subjects
Agents
Asymptomatic
COVID-19 vaccines
Decentralization
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Epidemics
Externality
Game Theory
Herd immunity
Immunity
Infections
Microeconomics
Public Finance
Race
Research Article
Self interest
Social action
Social and Behav. Sciences
Social distancing
Social interaction
COVID-19
J18
Herd immunity
Matching model
A12
Social distancing
D61-D62
SIR models
I10
Rat race
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Summary:Several externalities arise when agents shield optimally to avoid infection during an epidemic. We classify externalities into static and dynamic and compare the decentralized and optimal solutions when agents derive utility from social interaction. For low infection costs agents shield too little; for high costs they shield too much because of a “rat race to shield”: they delay social action until other agents contract the disease and society reaches herd immunity. Other externalities drive more wedges between the private and social outcomes. The expectation of a fully effective vaccine that ends the disease faster changes results, reversing excessive shielding.
ISSN:0938-2259
1432-0479
DOI:10.1007/s00199-023-01533-w