RATIONAL DISINHIBITION AND EXTERNALITIES IN PREVENTION

Flavio Toxvaerd

International Economic Review, 2019, vol. 60, issue 4, 1737-1755

Abstract: This article studies a model of disease propagation in which rational and forward‐looking individuals can control their exposure to infection by engaging in costly preventive behavior. Equilibrium outcomes under decentralized decision making are characterized and contrasted to the outcomes chosen by a social planner. In general, individuals overexpose themselves to infection, leading to suboptimally high disease prevalence. The model is applied to study the welfare effects of preexposure prophylaxis, which reduces transmission between serodiscordant couples and causes disinhibition. It is shown that a decrease in the induced infection risks increases disease prevalence and can lead to decreases in overall welfare.

Date: 2019
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