A Model of Sequential Crisis Management

Fei Li and Jidong Zhou

American Economic Journal: Microeconomics, 2023, vol. 15, issue 4, 319-49

Abstract: We propose a model of how multiple societies respond to a common crisis. A government faces a "damned-either-way" policymaking dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical about the costly response; light intervention worsens the crisis and causes the government to be faulted for not doing enough. When multiple societies encounter the crisis sequentially, due to this policymaking dilemma, late societies may underperform despite having more information, while early societies can benefit from a dynamic counterfactual effect.

JEL-codes: D72 D82 D83 H12 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/mic.20220107

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