Managing the endogenous risk of disease outbreaks with non-constant background risk

Kevin Berry, David Finnoff, Richard Horan and Jason Shogren

Journal of Economic Dynamics and Control, 2015, vol. 51, issue C, 166-179

Abstract: There is a growing concern that risks of disease outbreak and pandemics are increasing over time. We consider optimal investments in prevention before an outbreak using an endogenous risk approach within an optimal control setting. Using the threat of pandemic influenza as an illustrative example, we demonstrate that prevention expenditures are relatively small in comparison to the potential losses facing the USA, and these expenditures need to be flexible and responsive to changes in background risk. Failure to adjust these expenditures to changes in background risk poses a significant threat to social welfare into the future.

Keywords: Endogenous risk; Prevention schedule; Optimal control; Infectious disease (search for similar items in EconPapers)
JEL-codes: Q29 Q54 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:51:y:2015:i:c:p:166-179

DOI: 10.1016/j.jedc.2014.09.014

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