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A Model of Sequential Crisis Management

Author

Listed:
  • Fei Li
  • Jidong Zhou

Abstract

We propose a model of how multiple societies respond to a common crisis. A government faces a "damned-either-way" policymaking dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical about the costly response; light intervention worsens the crisis and causes the government to be faulted for not doing enough. When multiple societies encounter the crisis sequentially, due to this policymaking dilemma, late societies may underperform despite having more information, while early societies can benefit from a dynamic counterfactual effect.

Suggested Citation

  • Fei Li & Jidong Zhou, 2023. "A Model of Sequential Crisis Management," American Economic Journal: Microeconomics, American Economic Association, vol. 15(4), pages 319-349, November.
    • Handle: RePEc:aea:aejmic:v:15:y:2023:i:4:p:319-49
    DOI: 10.1257/mic.20220107
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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