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Static and dynamic inefficiencies in an optimizing model of epidemics

Garibaldi, Pietro, Moen, Espen R. and Pissarides, Christopher ORCID: 0000-0002-0695-058X (2023) Static and dynamic inefficiencies in an optimizing model of epidemics. Economic Theory. ISSN 0938-2259

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Identification Number: 10.1007/s00199-023-01533-w

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.

Item Type: Article
Official URL: https://link.springer.com/journal/199
Additional Information: © 2023 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
D - Microeconomics > D6 - Welfare Economics > D62 - Externalities
J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy
I - Health, Education, and Welfare > I1 - Health > I10 - General
Date Deposited: 31 Oct 2023 11:27
Last Modified: 15 Apr 2024 21:33
URI: http://eprints.lse.ac.uk/id/eprint/120572

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