Static and dynamic inefficiencies in an optimizing model of epidemics

Pietro Garibaldi, Espen R. Moen and Christopher Pissarides
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Espen R. Moen: Norwegian Business School, CEPR

Economic Theory, 2024, vol. 77, issue 1, No 2, 9-48

Abstract: Abstract 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.

Keywords: SIR models; Matching model; COVID-19; Social distancing; Rat race; Herd immunity (search for similar items in EconPapers)
JEL-codes: A12 I10 J18 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Static and dynamic inefficiencies in an optimizing model of epidemics (2023)
Working Paper: Static and Dynamic Inefficiencies in an Optimizing Model of Epidemics (2020)
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DOI: 10.1007/s00199-023-01533-w

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