Static and Dynamic Inefficiencies in an Optimizing Model of Epidemics

Arbeitspapier

In an optimizing model of epidemics several externalities arise when agents shield to avoid infection. Optimizing behaviour delays herd immunity but also reduces overall infections to approximately the minimum consistent with herd immunity. For reasonable parameter values, and with no vaccine, we find that agents delay too much because of a "rat race to shield": they shield too much in the hope that others catch the disease and reach herd immunity. This and other externalities drive large wedges between private and social outcomes. The expectation of a vaccine reverses the effects, and agents shield too little.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 13844

Classification and Topics

• Classification: Wirtschaft ; Relation of Economics to Other Disciplines ; Health: General ; Demographic Economics: Public Policy ; Allocative Efficiency; Cost-Benefit Analysis ; Externalities
• Subject: SIR models ; matching model ; COVID-19 ; social distancing ; rat race ; herd immunity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Garibaldi, Pietro ; Moen, Espen R. ; Pissarides, Christopher A.
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/227371
• Last update: 10.03.2025, 11:42 AM CET