Choosing between adaptation and prevention with an increasing probability of a pandemic

Kevin Berry and David Finnoff

Journal of Economic Behavior & Organization, 2016, vol. 132, issue PB, 177-192

Abstract: The risk of pandemics is increasing, driven by changes in human behavior and climate, both of which are difficult for policymakers to control. There are two main strategies available for reacting to these changes. This paper considers the decision to invest in either adaptation (domestic) capital or prevention (foreign) capital before a pandemic in an interval of time when pandemic risk is increasing. This paper demonstrates how relatively small investments in the two strategies can provide large savings through smaller expected future damages. The technical relationships between adaptation, prevention and risk also determine the optimal mixture of investment over time. As risk increases, the technical relationships between these three stocks causes the optimal mixture of strategies to change over time.

Keywords: Endogenous risk; Prevention schedule; Optimal control; Infectious disease (search for similar items in EconPapers)
JEL-codes: Q28 Q29 Q54 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:132:y:2016:i:pb:p:177-192

DOI: 10.1016/j.jebo.2016.06.007

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